Refer to BE16-11 except assume that the instruments are convertible bonds and that they have now been converted. Assume that Bantry Capital Ltd. follows ASPE, and that all of the proceeds were allocated to the debt component upon initial recognition. At time of conversion, the unamortized bond premium was $10,000, and the common shares had a fair value of $50 per share. Record the conversion using the book value method.
BE16-11
Bantry Capital Ltd. issued 500 $1,000 bonds at 103. Each bond was issued with 10 detachable stock warrants. After issuance, similar bonds were sold at 97, and the warrants had a fair value of $2.50.