Cullumber Inc, a publicly accountable enterprise that reports in accordance with IFRS, issued convertible bonds for the first time on January 1, 2020. The $1 million of six-year, 10 % (payable annually on December 31, starting December 31, 2020), convertible bonds were issued at 109. The bonds would have been issued at 98 without a conversion feature, and yielded a higher rate of return. The bonds are convertible at the investor's option. The company's bookkeeper recorded the bonds at 109 and, based on the $1,090,000 bond carrying value, recorded interest expense using the effective interest method for 2020. He prepared the following amortization table, believing that the yield was 9%: Cash Interest Date (10%) Jan. 1, 2020 Dec. 31, 2020 $100,000 Effective Interest Premium Carrying Amount (9%) Amortization of Bonds $1,090,000 $98,100 $1,900 1,088,100 You were hired as an accountant to replace the bookkeeper in November 2021. It is now December 31, 2021, the company's year end, and the CEO is concerned that the company's debt covenant may be breached. The debt covenant requires Cullumber to maintain a maximum debt to equity ratio of 2.3. Based on the current financial statements, the debt to equity ratio would be 2.6. The CEO recalls hearing that convertible bonds should be reported by separating out the liability and equity components, yet he does not see any equity amounts related to the bonds on the current financial statements. He has asked you to look into the bond transactions recorded and make any necessary adjustments. He would also like you to explain how any adjustments that you make affect the debt to equity ratio.