Solid Property Limited is a New Zealand company that owns a range of industrial and commercial properties in New Zealand. Shares are widely held. The company is about to issue some convertible notes and is seeking some assistance as to how the amounts should be recorded in its books. The number of notes to be issued is 2,000,000 with a principal amount (face value) of $1 each. The notes will be issued at $1.25 each, to raise $2,500,000. Interest will be paid at a coupon rate of 8% per annum at the end of each year. At the end of three years the notes will either be redeemed at face value, or be converted into shares on a "one share for one note" basis, at the option of the holder. You are advised that if these were "pure debt" instruments, an investor would require a 10% rate of return. Present value factors are shown in the table immediately below Present value Factors PV at 10% 0.9091 0.8264 0.7513 Year (End) PV at 8% 0.9259 0.8573 0.7938 REQUIRED (a) In accordance with NZ IAS 32, show the journal entry to record the issue of the convertible notes (assume no transaction costs associated with the issue) (2 marks) (b) Provide journal entries to account for the interest expense and the interest payment at the end of each year for the next three years (6 marks) At the end of the third year the balance in the Liability Account will be $2,000,000 Assume at that stage the share price is sufficiently high so that all note holders choose to convert their notes into shares. Show the journal entry (or entries) on conversion (c) (2 marks) At the end of the third year the balance in the Liability Account will be $2,000,000 Assume at that stage the share price is quite low, so that all note holders choose NOT to convert their notes into shares, but choose to redeem their notes at face value instead. Show the journal entry (or entries) on redemption (d) (2 marks)