(Conversion of Bonds) Excel Video Daisy Inc. issued $6 million of 10-year, 9% convertible bonds on June 1, 2023, at 98 plus accrued interest. The bonds were dated April 1, 2023, with interest payable April 1 and October 1. Bond discount is amortized semi-annually. Bonds without conversion privileges would have sold at 97 plus accrued interest. On April 1, 2024, $1.5 million of these bonds were converted into 30,000 common shares. Accrued interest was paid in cash at the time of conversion. Assume that the company follows IFRS. Instructions a. Prepare the entry to record the issuance of the convertible bonds on June 1, 2023. b. Prepare the entry to record the interest expense at October 1, 2023, by pro-rating the number of months. Start by calculating the effective rate on the bonds using (1) a financial calculator or (2) Excel functions. Round the effective rate to four decimal places. Assume that interest payable was credited when the bonds were issued. (Round to nearest dollar.)

(Conversion of Bonds) Excel Video Daisy Inc. issued $6 million of 10-year, 9% convertible bonds on June 1, 2023, at 98 plus accrued interest. The bonds were dated April 1, 2023, with interest payable April 1 and October 1. Bond discount is amortized semi-annually. Bonds without conversion privileges would have sold at 97 plus accrued interest. On April 1, 2024, $1.5 million of these bonds were converted into 30,000 common shares. Accrued interest was paid in cash at the time of conversion. Assume that the company follows IFRS. Instructions a. Prepare the entry to record the issuance of the convertible bonds on June 1, 2023. b. Prepare the entry to record the interest expense at October 1, 2023, by pro-rating the number of months. Start by calculating the effective rate on the bonds using (1) a financial calculator or (2) Excel functions. Round the effective rate to four decimal places. Assume that interest payable was credited when the bonds were issued. (Round to nearest dollar.)

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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