Fiction plc issues 10 million in convertible bonds on 1 July 2015. They are issued at their face value and pay an interest rate of 4 per cent. The interest is paid at the end of the year. The bonds may be converted to ordinary shares in Fiction Plc at any time in the next three years. Organisations similar to Fiction Plc have recently issued similar debt instruments but without the option for conversion to ordinary shares. These instruments issued by other entities offer interest at a rate of 6 per cent. On 1 July 2016 all the holders of the convertible notes decide to convert the bonds to shares in Fiction Plc. The following extract from the net present value tables may be of some assistance: Year/Rate 2% 4% 6% 8% 0.9804 0.9615 0.9434 0.9259 1 2 0.9612 0.9246 0.8900 0.8573 3 0.9423 0.889 0.8396 0.7938 4 0.9238 0.8548 0.7921 0.735 5 0.9057 0.8219 0.7473 0.6806 The following extract from the net present value tables of an annuity may be of some assistance: Year/Rate 2% 4% 6% 8% 1 0.9804 0.9615 0.9434 0.9259 2 1.9416 1.8861 1.8334 1.7833 3 2.8839 2.7751 2.6730 .5771 4 3.8077 3.6299 3.4651 3.3121 5 4.7135 4.4518 4.2124 3.9927 Required: Provide all relevant calculations and the journal entries to: Record the issue of the securities on 1 July 2015; Recognise the interest payment on 30 June 2016; Recognise the conversion of the bonds to ordinary shares on 1 July 2016. You should include a short explanation of your calculations. (15%)