Instructions: All answers must be typed in and all workings must be shown.

QUESTION TWO Blender & Grinder Limited issued, 500 000 20% debentures on the 2 January 2017, at the face value of R10 each (which represented the fair value on issue date) The 20% debenture interest is payable on the 31st December each year and the debentures are compulsory convertible into ordinary shares on the 31st December 2019 at 1 ordinary share for every 5 debentures held. An appropriate adjusted market dividend rate for pure redeemable debentures is 25%. The debentures are not held for trading. Required Prepare a memorandum to the directors of Blender & Grinder Limited outlining 1. The journal entries required to record the financial instrument over its 3-year life in terms of IFRS 9 Financial Instruments. 2. Discuss whether the following meet the definition of a financial asset? a. Inventory b. Trade receivables C. Prepaid electricity 3. Briefly explain whether petty cash on hand meets the definition of a financial asset AND a financial instrument