ollowing cases are independent Case A On 1 January 20X6, Wilson Products Ltd. issued a bond when market interest rates were 6%. Bonds payable, $3,000,000, 4%, due in 6 years' time. The bonds pay interest semi- annually each 30 June and 31 December. The bonds were issued at 102. Each $200 bonds is mandatorily convertible into common shares at the fixed rate of 40 shares per bond at maturity. The company may, at its discretion, repay the bond for cash in lieu of shares. Required 1. Prepare the journal entry at 1 January 20X6, to record issuance of the bond. (7 marks) 2. Prepare the 20x8 journal entries for the June 30th interest expense. (6 marks) 3. Provide the entry to record interest and bond conversion to common shares at maturity, on December 31 20X11. Common shares have a fair value of $2.50 per share at this time. (8 marks) Case B On 1 November 20X4, XBL Communications Ltd. issued a convertible bond that was convertible in 12 years' time into 500,000 common shares at the investor's option. The bond had a $7,000,000 par value, and 6% interest was paid semi-annually on 31 October and 30 April. The bond was issued for $7,900,000 when the market interest rate was 8% Required 1. Prepare the journal entry at 1 November 20X4, to record issuance of the bond. (6 marks) 2. Prepare the December 31 20X4 journal entry for interest. (6 marks) 3. Provide the entry to record bond conversion to common shares at maturity, on October 31 20X16. Interest expense has already been recorded. Common shares have a fair value of $19 per share at this time. (4 marks) 1 4. Provide the entry to record early repayment of the bond, assuming it was repaid in cash, in an open market transaction on October 31, 20x8 Interest expense for October 31, 20X8 has already been recorded. Cash of $8,000,000 was paid, of which, 6,100,000 related to the liability and $1,900,000 related to the conversion option. (9 marks) 40