Reference no: EM132575973

Question - Sandhill Inc. has $4 million of 9% convertible bonds outstanding. Each $1000 bond is convertible into 40 no par value common shares. The bonds pay interest on January 31 and July 31. On July 31, 2020, the holders of $1,200,000 of these bonds exercised the conversion privilege. On that date, the market price of the bonds was 114, the market price of the common shares was $30, the carrying value of the common shares was $15, the contributed surplus- conversions rights account balance was $469,000. The total unamortized bond premium at the date of conversion was $195,000. The remaining bonds were never converted and were retired when they reached the maturity date. Assume that the company follows IFRS.

Required -

1) Assume that the book value method was used, record the conversion of the $1,200,000 of bonds on July 31, 2020.

2) Prepare the journal entry that would be required for the remaining amount in Contributed Surplus- Conversion Rights when the maturity of the remaining bonds is recorded.