Question 4 On 1 January 2018, Gamma Berhad issued 8% RM9 million convertible loan stock at face value of RM9 million. The loan stock is convertible or redeemable at par in four years' time. Each RM100 loan stock will be convertible into 50 equity shares of Gamma Berhad. A finance consultant said that if the option to convert to equity had not been included in the terms of issue, then the prevailing market rate of 12% would have been required to attract subscribers for the loan stock. The value of RM1 receivable at the end of each year at a discount rate of 12% must be determined according to formula. Required: (a) Briefly explain TWO (2) differences between equity instrument and liability instrument. (b) Calculate the equity and liability components of the 8% convertible loan stock on 1 January 2018. (c) Prepare the amortisation table for the liability component (d) Prepare the journal entries to record the above transactions (ignore narrations) for the last two years if all loan stock holders choose to i. convert the loan stock into equity shares on maturity ii. redeem the loan stock on maturity. (e) Prepare the extracted financial statements for the last two years under i. conversion option ii. redemption option.