Sunland Inc. issued $$3$ million of $10-$year, $9\%$ convertible bonds on June $1,2023,$ at $98$ plus accrued interest. The bonds were dated April $1,2023,$ with interest payable April $1$ and October $1.$ Bond discount is amortized semi$-$annually. Bonds without conversion privileges would have sold at $97$ plus accrued interest. On April $1,2024,$ $$0\mathrm{.}75$ million of these bonds were converted into $15,000$ common shares. Accrued interest was paid in cash at the time of conversion. Assume that the company follows IFRS.

Instructions

a$.$ Prepare the entry to record the issuance of the convertible bonds on June $1,2023.$

b$.$ Prepare the entry to record the interest expense at October $1,2023,$ by pro$-$rating the number of months. Start by calculating the effective rate on the bonds using $(1)$ a financial calculator or $(2)$ Excel functions.

Round the effective rate to four decimal places. Assume that interest payable was credited when the bonds were issued. $($Round to nearest dollar.$)$

c$.$ Prepare the entry$($ies$)$ to record the conversion on April $1,2024.($The book value method is used.$)$ Assume that the entry to record amortization of the bond discount and interest payment has been made.

d$.$ Repeat part $($c$)$ by using $(1)$ a financial calculator or $(2)$ Excel functions to calculate the bond discount. $($Round to the nearest dollar.$)$

e$.$ Assume that Daisy follows ASPE. Discuss how the issuance of convertible bonds is recorded, and prepare the entry$($ies$)$ to record the issuance of the convertible bonds on June $1,2023.$

f$.$ Digging Deeper What do you believe was the likely fair value of the common shares as at April $1,2024($the date of conversion$)?$