PT ABC issued 1,000 shares of convertible bonds at par with a face value of Rp 200.000 per bond at January 1, 2019. The bonds have a-6 year life with payment of 7% interest at the end of December. Each bond is convertible into 100 ordinary shares with a par value Rp 500. A market ratefor similar debt is 9%.

Instruction :

a.Compute the liability and equity component of the convertible bond on January 1, 2019.

b.Prepare the journal entry to record the conversion of convertible bonds into ordinary shares on December 31, 2022.