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:

Demand Schedule

is a table that lists the quantity of a good that consumers are willing to buy at different price levels, showing the relationship between price and quantity demanded.

Marginal Cost

The cost of producing one additional unit of a product, reflecting changes in variable cost as output is adjusted.

Average Cost

The total cost of production divided by the number of goods produced, providing a cost per unit of output.

Marginal Revenue

The incremental revenue resulted from the sale of one more product or service unit.