Question

Sunland Capital Ltd. issued 550 convertible $1,000 bonds at 103. After issuance, similar bonds were sold at 97. Assume that Sunland Capital Ltd. follows IFRS and recorded the issuance of the bonds and conversion rights accordingly. On a date when the bonds had a carrying value of $538,000, Bantry paid $13,200 to the bondholders to induce early conversion. Record the conversion using the book value method. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.) Account Titles and Explanation Debit Credit enter an account title enter a debit amount enter a credit amount enter an account title enter a debit amount enter a credit amount enter an account title enter a debit amount enter a credit amount enter an account title enter a debit amount enter a credit amount enter an account title enter a debit amount enter a credit amount

Account Titles and Explanation	Debit	Credit
Bond Payable	enter a debit amount	enter a credit amount
Contributed Surplus	enter a debit amount	enter a credit amount
Loss On Redemption Of Bond	enter a debit amount	enter a credit amount
Cash	enter a debit amount	enter a credit amount
Common Share	enter a debit amount	enter a credit amount

Answer 1

Solutim: oor book value method, the book valuce at which were record oor the books of the issuer is the bonds were recorded one shifted to the applicable stock allorens This shift mores the bond liability into the equity pare of balance sheet. 66 there is no recognition of again or less on conversion. transaction. The possible line item entries associated with the book value method are as follows: Toral issue price 550 X 1000 x 1-03 = 566500 533500 550 X 1000 X 0.97 = Bonds price Therefore, the folo wing journal entry would be used to this only - Bonds payable $ 15,59000(Dr.) Premium on Bonds payable $ 16,500(DV.) cartributed tuled) Common stock $. 13,200 (Cr) Paid in Capital in excess of Pas. 4.553700 Even though the market value of the common stolk provided to the investos ist 1535500 , the books rakce of the bonds is used to value the transaction. Caen (DV. 4. 566500