On January 1, 20X1 Ciscle Inc. , a real estate company, using IFRS, issued $2,000,000, 16%, 10 year bonds for a cash price of $2,500,000. Interest is payable semi-annually on June 30 and December 31. Each $200 bond includes 40 warrants. Each warrant can be exchanged for one common share of Ciscle at an exercise price of $20 per share. The market rate of interest is 12% for similar bonds without warrants and the fair market value of these bonds was determined to be $2,170,604.

Required:

1)Prepare the appropriate journal entry to record the issue of the bonds on January 1, 20X1;

2)Prepare the appropriate journal entry required on December 31, 20X1;

3)How would the bonds be reported on the balance sheet at December 31, 20X1;

4)30% of the warrants were exercised on July 1, 20X3 when the shares of Ciscle were being traded at $23. Prepare the appropriate journal entry or entries which the company should make on July 1, 20X3 to record this transaction.

Note: A bond amortization table.