Thunderbolt plc raised finance through the issue of shares on 1 April 2018. The company issued convertible bonds at their nominal value of K20 million. Interest is payable annually in arrears at the rate of 5%. The conversion would be done on the following terms: Each K 4000 bond is convertible at any time up to maturity into 800 ordinary shares. Alternatively the bonds would be redeemed at par after 4 years in 2022. The market rate applicable to non convertible bonds is 9%. (The present value of $1 payable at the end of the year, based on rates of 5% and 9% are given in the table of the Appendix at the end of the question paper.) 

Required: 

a) Explain why recognition of convertible bonds should be split into the liability component and the equity component, and calculate the two amounts Thunderbolt recognised.

b) Prepare an amortisation schedule showing amounts outstanding at the end of each of the four years to 31 March 2022 (Work to the nearest $000)

c) State what amounts would be reported in the statement of profit or loss and other comprehensive income for the year to 31 March 2020 in respect of the bonds.

d) State what amounts would be reported in the statement of financial position as at 31 March 2020 in respect of the bonds.