Cornerstone Construction Ltd. offers five-year, 8% convertible bonds (par $ 1,000). Interest is paid annually on the bonds. Each $ 1,000 bond may be converted into 100 common shares, which are currently trading at $ 8 per share. Similar straight bonds carry an interest rate of 10%. One thousand bonds are issued at 101.

Assume now that Cornerstone follows ASPE and has chosen as an accounting policy to value the equity component at zero. Prepare the journal entry at the date of issuance of the bonds.