Sampras Ltd issues $20 million of convertible notes on 1 July 2020. The notes have a life of 6 yrs and a face value of $20 each. Annual interest of 5% is payable at the end of each year. The notes were issued at their face value and each note can be converter into one ordinary shares in Sampras Ltd at any time over their lives. Organisations with similar risk profile to Sampras Ltd have issued debt with similar terms but without the option to convert at the rate of 7% per annume

Required

Identify the present value of the notes and calculate the equity component of the convertible notes

Provide Journal entries

a) issue of the convertible notes

b) the first payment of interest

c) the conversion of convertible notes into shares on 30 June 2021