Lachapelle Drilling Inc., which follows IFRS, offers ten$-$year, $6\%$ convertible bonds $($par $ $1,000).$ Interest is paid annually on the bonds. Each $$1,000$ bond may be converted into $50$ common shares, which are currently trading at $$17$ per share. Similar straight bonds carry an interest rate of $8\%.$ One thousand bonds are issued at $91.$

Instructions

a$)$ Assume Lachapelle decides to use the residual method and measures the debt first. Calculate the amount to be allocated to the bond and to the option.

b$)$ Prepare the journal entry at date of issuance of the bonds under IFRS.

c$)$ Assume that after six years, the carrying amount of the bonds is $ $933,757.$ The holders of the convertible debt decide to convert their convertible bonds before the bond maturity date. Prepare the journal entry to record the conversion.

d$)$ How many shares were issued at the conversion?