Sunland Inc. issued $6 million of 10-year, 10% convertible bonds on June 1, 2020, at 96 plus accrued interest. The bonds were dated April 1, 2020, with interest payable April 1 and October 1. Bond discount is amortized semi-annually. Bonds without conversion privileges would have sold at 95 plus accrued interest. On April 1, 2021, 51.50 million of these bonds were converted into 30.000 common shares. Accrued interest was paid in cash at the time of conversion. Assume that the company follows IFRS. Prepare the entry to record the issuance of the convertible bonds on June 1, 2020. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. Round answers to decimal places, eg. 5,275.) Date Account Titles and Explanation Debit Credit June 1, 2020 Cash 5860000 Loss on Redemption of Bonds 240000 Interest Payable 100000 Bonds Payable 6000000 eTextbook and Media List of Accounts Prepare the entry to record the interest expense at October 1, 2020. 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. Assume that interest payable was credited when the bonds were issued (Credit account titles are automatically indented when the amount is entered. Do not indent manually. Round effective interest rate to 4 decimal places, eg. 3.5275% and final answers to decimal places, eg. 5,275.) Date Account Titles and Explanation Debit Credit October 1, 2020 Prepare the entry to record the conversion on April 1, 2021. (The book value method is used. Assume that the entry to record amortization of the bond discount and interest payment has been made. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. Round answers to decimal places, eg. 5,275.) Date Account Titles and Explanation Debit Credit April 1, 2021 eTextbook and Media List of Accounts Prepare the entry to record the conversion on April 1, 2021. Assume that the entry to record amortization of the bond discount and interest payment has been made by using (1) a financial calculator or (2) Excel functions to calculate the bond discount. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. Round answers to decimal places, eg. 5,275.) Date Account Titles and Explanation Debit Credit April 1, 2021 eTextbook and Media List of Accounts Assume that Sunland follows ASPE. Prepare the entry to record the issuance of the convertible bonds on June 1, 2020 assuming that the equity component is measured at $0. (Credit account titles are automatically indented when the amount is entered. Do not indent manually.) Date Account Titles and Explanation Debit Credit June 1, 2020 What do you believe was the likely fair value of the common shares as at April 1, 2021 (the date of conversion)? likely market value of the common shares as of the date of the conversion of April 1. 2018 would be than $
