A Company Issues Convertible Bonds with Face Value of $7,000,000

question 76

Essay

A company issues convertible bonds with face value of $7,000,000 and receives proceeds of $8,500,000.Each $1,000 bond can be converted,at the option of the holder,into 100 common shares.The underwriter estimated the market value of the bonds alone,excluding the conversion rights,to be approximately $7,300,000.
Requirement:
Record the journal entry for the issuance of these bonds based on IFRS.

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Definitions:

Capital Budgeting Investment Rule

Guidelines or criteria used by businesses to evaluate and select among potential investments or projects based on their expected returns or value.

Increase in Cost

A financial term indicating a rise in expenses or prices, affecting the overall cost structure of a business or the price level in an economy.

Internal Rate of Return (IRR)

The discount rate that makes the net present value (NPV) of all cash flows from a particular project zero, used to assess the profitability of potential investments.

Mutually Exclusive Project

Projects where the acceptance of one project means the others cannot be pursued due to constraints like budget, resources, or project scope.