Page 63 - F2 Integrated Workbook STUDENT 2019
P. 63
Financial instruments
Example 3.1
A company issues 5% convertible bonds at their nominal value of $4 million on
1 January 20X3.
Each bond is convertible at any time up to maturity into three $1 ordinary shares
for every $1 bond. Alternatively, the bonds will be redeemed at par after 3
years.
The market rate applicable to non-convertible bonds is 6%.
Required:
Show the journal entry required to record the initial recognition of the
convertible bonds on 1 January 20X3. Give your figures to the nearest
$000.
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