A Company Issues Convertible Bonds with Face Value of $5,000,000

question 36

Essay

A company issues convertible bonds with face value of $5,000,000 and receives proceeds of $6,500,000. Each $1,000 bond can be converted, at the option of the holder, into 80 common shares. The underwriter estimated the market value of the bonds alone, excluding the conversion rights, to be approximately $6,300,000.
Required:
Record the journal entry for the issuance of these bonds based on IFRS.

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Definitions:

LeClanché Cell

An early type of wet cell battery consisting of a zinc anode, a manganese dioxide cathode, and an electrolyte of ammonium chloride.

Carbon-Zinc

A type of battery chemistry characterized by the use of carbon and zinc as the electrode materials, often used in household batteries.

Alkaline

A type of battery chemistry that is based on the reaction between zinc and manganese dioxide, characterized by high energy density.

Hydrometer

A device used to measure the specific gravity of a fluid, such as the electrolyte used in a battery.