Mecca Energy Corp. issued a convertible bond on 1 August 20X9. The 10-year, 4% $12,000,000 bond pays interest semi-annually each 31 July and 31 January. At maturity, each $1,000 bond is convertible into 120 common shares. The bond was issued for $12,500,000. Market interest rates were approximately 5%.

Required:
1. Provide the journal entry to record the initial issuance of the bond.
2. Assume instead that the bond was convertible into common shares at the maturity date into common shares based on the market value of common shares at that time. Repeat
requirement 1. Explain.