On January 1, 2023, MacGregor Ltd. issued 1,000 five-year, 10% convertible bonds at par of $1,000, with

Question:

On January 1, 2023, MacGregor Ltd. issued 1,000 five-year, 10% convertible bonds at par of $1,000, with interest payable each December 31. Each bond is convertible into 100 common shares, and the current fair value of each common share is $6. Similar straight bonds carry an interest rate of 12%.

(a) Calculate the PV of the debt component by itself. Show calculations using any of the following methods: (1) factor tables, (2) a financial calculator, or (3) Excel function PV.

(b) How should MacGregor record the issuance if it follows IFRS? Use the amount you arrived at in part (a) using a financial calculator or Excel, rounded to the nearest dollar.

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