Superior Corporation’s summary statement of financial position as at 31 December 20x2 is as follows.

Additional information

(a) Non-current liability was made up solely of a $10,000,000 convertible bond with a coupon rate of 3% issued at par on 1 January 20x0. At the time of issue of the bond, the market interest rate was 5%. The bond was convertible into ordinary shares at the ratio of 500 ordinary shares for every $1,000 bond. Interest on the bond is payable every six months on 30 June and 31 December. The bond matured on 31 December 20x4.

(b) Superior Corporation’s draft income statement reported net earnings after tax of $1,800,000.

(c) The draft financial statements were prepared by an assistant accountant who was not aware of the provisions of IAS 32 and accounted for the bond as a conventional bond without the conversion feature.

(d) Ignore taxation.

Required
1. Show the revised summary statement of financial position as at 31 December 20x2 after making adjustments to the accounting treatment of the convertible bond in accordance with IAS 32.
2. Assume that holders of the convertible bond converted 30% of the bond on 30 June 20x2. Show the proforma equity section of the statement of financial position as at 31 December 20x2 in accordance with the provisions of IAS 32.
3. Based on (2) above, show the journal entries for 20x2.

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SUPERIOR CORPORATION Statement of Financial Position As at 31 December 20x2 Non-current assets. Current assets.. Current liabilities. Non-current liability. Share capital... Retained earnings. $20,000,000 8,000,000 $28,000,000 $ 6,000,000 10,000,000 10,000,000 2,000,000 $28,000,000