On January 1, 2011, Biron Corp. issued $1.2 million of five-year, zero-interest-bearing notes along with warrants to buy 1 million common shares at $20 per share. On January 1, 2011, Biron had 9.6 million common shares outstanding and the market price was $19 per share. Biron Corp. received $1 million for the notes and warrants. If offered alone, on
January 1, 2011, the notes would have been issued to yield 12% to the creditor. Assume that the company follows IFRS.
Instructions
(a) Prepare the journal entry(ies) to record the issuance of the zero-interest-bearing notes and warrants for the cash consideration that was received.
(b) Prepare an amortization table for the note using the effective interest method.
(c) Prepare adjusting journal entries for Biron Corp. at the end of its fiscal year of December 31, 2011.
(d) Prepare the journal entry required for Biron Corp. if half of the warrants are exercised on January 1, 2014.