Lord Motor Co. is a large carmaker famous for the high-quality automobiles it manufactures. The Company recently completed a debt restructuring initiative that substantially reduced its debt and lowered its interest expense. 

The company previously issued $50 million in 5% convertible bonds on January 1, 2021 for net proceeds of $46,869,892. The market interest rate for similar non-convertible debt at that time was 8%. The bonds mature on January 1, 2029, and pay interest semiannually on January 1 and July 1. 

On October 1, 2023, Lord Motor Co. announced a conversion offer proposing to pay a cash premium to induce the holders of the bonds to convert them into shares of Lord’s common stock. Bondholders had until December 31, 2023, to tender their bonds for conversion under the enhanced offer. Bonds with a face amount of $42 million were tendered resulting in the payment of accrued interest on the bonds; the issuance of an aggregate 2.52 million shares of Lord’s common stock; and the payment of an aggregate $1.26 million in cash for the inducement.

On December 31, 2023, Lord Motor’s shares traded at $15.50 and the convertible bonds at $95. Lord Motor reports its financial results in accordance with IFRS. 

Required: 

a. What are some reasons why Lord Motor offered bondholders the option to convert their debt to equity? Why did they offer the cash as an inducement? 

b. What percentage of bondholders accepted the offer? 

c. What was the conversion rate expressed as 1 share per $x.xx dollars of bonds? 

d. For each $10,000 in bonds (face value) converted, how much cash did the holder receive as an inducement to convert? 

e. Prepare the journal entries required on December 31, 2023. 

f. What will the interest expense be in 2024? How much was expensed in 2023? 

g. Was the cash inducement necessary to make bondholders convert? Explain your reasoning.