Long term liabilities 1. On January 1, 2011, Kate Products issued five-year convertible bonds of $400,000. Interest is payable semi-annually on June 30 and December 31 at a rate of 10%. The effective yield is 6%. Each $1,000 bond can be convertible into six shares of Kate Products' ordinary shares starting from January 1, 2013. Assume without the convertible option, investors would demand a yield of 8%.

On Jan 1, 2014, the bondholders convert 80% of the bond into common shares, and the remaining 20% were never exercised till maturity.

Following the with-and-without method, prepare journal entry for Kate on: 1) on January 1, 2011 regarding the bond issuance 2) Interests payment for 2011; 3) Jan 1, 2014 for the 80% of the conversion; 4) Interest payment for the year 2014; 5) Dec 31, 2015 for the expiry of the bond and repayment of the bond.