Westwind Ltd, a company listed on the Australian Stock Exchange, issued $10 million of convertible notes on 1 July 2020. The notes had a four-year term and were issued at a face value of $1 per note. Interest was payable annually on 30 June at 6% per annum. Each note was convertible at the option of the holder into one ordinary share on or before maturity. On 1 July 2020, the market interest rate for similar notes, without a conversion option, was 8% per annum. The fiscal year end of Westwind Ltd. is 30 June.

REQUIRED:

Your answers must comply with AASB 132 Financial Instruments: Disclosure and Presentation and AASB 9 Financial Instruments.

1. Prepare a journal entry to record the issue of the convertible notes on 1 July 2020.
2. Prepare journal entries to record the payments of interest to note holders on 30 June 2021.
3. Assume that all of the notes are converted into ordinary shares at the end of the year ending 30 June 2021 (following the interest payment), prepare a journal entry to record the conversion of notes into ordinary shares.

Round to the nearest dollar amount. Show all workings. No narration is required.