A Company Issues Convertible Bonds with Face Value of $10,000,000

question 27

Essay

A company issues convertible bonds with face value of $10,000,000 and receives proceeds of $10,500,000.Each $1,000 bond can be converted,at the option of the holder,into 800 common shares.The underwriter estimated the market value of the bonds alone,excluding the conversion rights,to be approximately $8,300,000.
Requirement:
Record the journal entry for the issuance of these bonds based on IFRS.

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Definitions:

Minimum Required Rate of Return

The lowest rate of return that a potential investment must offer to be considered acceptable, taking into account the investor's cost of capital and risk appetite.

Annual Turnover

The total sales or revenue a company generates in one year.

ROI Analysis

A financial metric used to evaluate the efficiency of an investment or compare the efficiency of several different investments, calculated by dividing the net profit from the investment by the initial cost of the investment.

Net Operating Income

The income generated from normal business operations, calculated as revenues minus operating expenses and excluding income from investments and taxes.