Question: Compound Financial Instrument Example # 2 Convertible bond Company A issues 5,000 convertible bonds with a face value of $ 5,000,000 for $ 4,850,000

Compound Financial Instrument
Example # 2 – Convertible bond
Company A issues 5,000 convertible bonds with a face value of $ 5,000,000 for $ 4,850,000 on Jan 1, 2021
5% interest paid semi-annually, principal matures in 5 years
Each bond can be converted into 200 common shares at any time
Comparable bonds with no conversion feature have interest rate of 8%
What are the entries for 2021 assuming no bonds were converted?

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