Question: On January 1st. 2021, X Company issued 8%, five-year, $1,000 par value convertible bonds maturing on January 1st. 2026. Interest is paid annually on the bonds. Each $1,000 bond may be converted into 100 common shares, which are currently trading at $9.00 per share. Similar straight bonds carry an interest rate of 10%. One thousand bonds are issued at 102.

Required:- i. Assume X follows IFRS and decides to use the residual method and measures the debt first, calculate the amount to be allocated to the bond and to the common shares.

ii. Prepare the journal entry at the date of issuance of the bonds under IFRS.

iii. Prepare a bond amortization table from January 1st.2021 to December 31st.2021.

iv. Assume that on July 1st.2023, half of the bonds were converted before their maturity date. Prepare the journal entry to record the conversion.

v. How many shares were issued at the conversion.

vi. Assume now that X follows ASPE and has chosen as an accounting policy to value the equity component at zero, prepare the journal entry at the date of issuance of the bonds.

Thank you for your help.