On January 1, 2017,King Co issued a $8 million, 8%, 10-year convertible bond with annual coupon payments. Each $1,000 bond was convertible into 25 shares of Kings common shares. Prince Investments purchased the entire bond issue for $8,250,000 million on January 1, 2017. King estimated that without the conversion feature, the bonds would have sold for $7,508,435 (to yield 10%).

On January 1, 2019, Prince converted bonds with a par value of $4 million. At the time of conversion, the shares were selling at $45 each.

Required:

1. Prepare the journal entry to record the issuance of the convertible bonds. Assuming both companies use IFRS.(3 Marks)
2. Prepare the possible journal entries for issuance of the Bonds if both companies uses ASPE. (5 Marks)
3. Prepare an effective interest amortization schedule for the period January 1, 2017-January 1, 2019 (date of conversion) Calculate the Book value of the Bonds at January 1, 2019 and prepare the journal entry to record the conversion according to IFRS (book value method). (8 Marks)