PART 1: (12 marks) At the beginning of semi-annual interest period \#1 Yukon Lookout Inc. issued 10 year convertible (at the holder's option) bonds with a face value of $1,000,000 and a coupon rate of 4.00% for $990,000. The company is compliant with IFRS. Bond interest is paid semi-annually. When the bonds were issued, the prevailing market interest rate for similar debt without a conversion option was 5%. Option pricing models indicate that the conversion option's value on the date the bonds were issued was $65,500. Assume the convertible option is a derivative that is not closely related to the bond liability and that Yukon Lookout Inc. decided not to treat the entire hybrid instrument as held for trading (at fair value through profit or loss). Each $1,000 face value bond can be converted by the holder into 20 shares. Similar bonds without a conversion option were selling on the open market at 92.205419%. 50% of the $1,000.000 face value bonds were converted after interest was paid at the end of semiannual period \#14 when the fair market value per share was \$100. Mr. Dinesh Chandimal, Yukon Lookout's recently retired accountant applied, contrary to IFRS 9, the 'market value method' to record this transaction. as follows: Required Assume it is month-1 of semi-annual period \#15 and that the books were closed at the end of semiannual interest period \#14. As Yukon Lookout's new chief financial officer you have become aware of the above journal entry. You also discover that Mr. Chandimal used the straight-line method when amortizing the bond's discount. Prepare all journal entry(ies) which you believe are necessary to correct any errors that Mr. Chandimal made when accounting for these convertible bonds. PART 1: (12 marks) At the beginning of semi-annual interest period \#1 Yukon Lookout Inc. issued 10 year convertible (at the holder's option) bonds with a face value of $1,000,000 and a coupon rate of 4.00% for $990,000. The company is compliant with IFRS. Bond interest is paid semi-annually. When the bonds were issued, the prevailing market interest rate for similar debt without a conversion option was 5%. Option pricing models indicate that the conversion option's value on the date the bonds were issued was $65,500. Assume the convertible option is a derivative that is not closely related to the bond liability and that Yukon Lookout Inc. decided not to treat the entire hybrid instrument as held for trading (at fair value through profit or loss). Each $1,000 face value bond can be converted by the holder into 20 shares. Similar bonds without a conversion option were selling on the open market at 92.205419%. 50% of the $1,000.000 face value bonds were converted after interest was paid at the end of semiannual period \#14 when the fair market value per share was \$100. Mr. Dinesh Chandimal, Yukon Lookout's recently retired accountant applied, contrary to IFRS 9, the 'market value method' to record this transaction. as follows: Required Assume it is month-1 of semi-annual period \#15 and that the books were closed at the end of semiannual interest period \#14. As Yukon Lookout's new chief financial officer you have become aware of the above journal entry. You also discover that Mr. Chandimal used the straight-line method when amortizing the bond's discount. Prepare all journal entry(ies) which you believe are necessary to correct any errors that Mr. Chandimal made when accounting for these convertible bonds
