Reference no: EM132575797

LMN Company reported the following amounts on its balance sheet at July 31, 2019:

Liabilities

Convertible bonds payable, $10,000,000 face value 8%, due July 31, 2019 $9,818,182

Equity

Contributed surplus-common stock conversion rights $ 300,000

Preferred shares, no par, 3,000,000 shares authorized, 10,000 outstanding $1,100,000

Common shares, no par, 1,000,000 shares authorized, 180,000 outstanding $4,500,000

Additional information

1. The bonds pay interest each July 31. Each $1,000 bond is convertible into 5 common shares. The bonds were originally issued to yield 10%. On July 31, 2019, all the bonds were converted after the final interest payment was made. LMN uses the book value method to record bond conversions as recommended under IFRS.

2. No other share or bond transactions occurred during the year.

Required:

Question a. Prepare the journal entry to record the bond interest payment on July 31, 2019.

Question b. Calculate the total number of common shares outstanding after the bonds' conversion on July 31, 2019.

Question c. Prepare the journal entry to record the bond conversion.