CPA Way - Chapter 15 Looney Phone Cases Inc. ("LPC") is a company that specializes in manufacturing unique phone cases. They are a rapidly growing company and have decided to use a complex financial instrument to raise cash and fuel more growth. On March 1, 2020, LPC issued $300,000 of 8% non-convertible bonds at 104, which are due on February 28, 2040. In addition, each $1,000 bond was issued with 25 detachable warrants, each of which entitled the bondholder to purchase one of Loma's no par value common shares for $50. Looney reports under IFRS. Chandler Ring, the Controller of LPC has just hired you, CPA, as a Junior Corporate Accountant. Chandler says to you: I'm in big trouble! The CFO says that I've messed up too many times, and they're going to send me to our Tulsa office if I don't classify this instrument correctly. I think these bonds would normally sell at 95 without the warrants. Can you explain to me how they would be classified, and then help me with the entries? I don't understand, we're promising the buyers of these bonds warrants which could be assigned a cash value, why can't I just make an entry for one big liability? ASSESS the Situation: maximum 2 sentences The company is issuing convertible bond and non-convert bond. ANALYZE Major Issues: maximum 6 sentences The Non-convertible bond normally has higher rate than convertible bond and receive interest at the end of maturity. Normally the holder of non-convertible bond cannot convert bond to equity shares of company. CONLUDE: maximum 2 sentences, plus journal entries, if applicable & ADVISE: maximum 2 sentences