Francine Ltd. is a public corporation and issues $100,000 8% convertible three-year bonds for $112,000. Each $1,000 bond is convertible at the option of the investor into 10 no-par value common shares of Francine Ltd. on maturity. At the date of issue, similar type non-convertible bonds of Francine Ltd. are selling for $102,000.

The above bonds are issued by Francine Ltd. during the year ending December 31, 2018.

REQUIRED:

a)Indicate how convertible debt is initially recognized for accounting purposes, and explain your reasoning. (4 marks)

b)Prepare the journal entry to record the issuance of the bonds. (4 marks)

c)Assume that on maturity of the bonds, the market price of Francine Ltd. common shares is set at $116. Prepare the journal entry to record the conversion of the bonds using the book value method. (4 marks)

d)Assume that on maturity of the bonds, the market price of Francine Ltd. common shares is set at $92. Prepare the journal entries to record the repayment of the bonds. (4 marks)

e)Assume rather that Francine Ltd. is a private company accounting under ASPE. Describe the alternate accounting method available to Francine Ltd. in recording the issue of the bonds. (4 marks)