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:

Billowing Clouds

Large masses of clouds that appear to be puffing upwards, often described in the context of smoke or volcanic ash clouds.

Glowing Orange

Refers to the bright orange color typically emitted by hot materials or objects, such as molten lava.

Actively Erupting

A volcanic state characterized by ongoing expulsion of lava, ash, or other volcanic material.

Conical-Shaped Hill

A landform with a circular base and sloping sides that converge to a point at the top, resembling the shape of a cone.