For each of the unrelated situations described below, prepare the entry(ies) required to record all the 2020 transactions. Where relevant, provide any optional entries that are acceptable under GAAP

a) On January 1, 2020, Azores Corporation called its 6% convertible bonds for conversion. The $400,000 par value bonds were converted into 40,000 common shares. On that date, the bonds payable account balance was $440,000. At the time of issuance, Contributed Surplus—Conversion Rights was credited for $32,000, which represented the equity portion of the convertible bonds The market value of the common shares on January 1, 2020, was $10 per share. The company follows IFRS and records the conversion using the book value method. Ignore all interest payments.

b) Canary Inc., which follows IFRS, issued $400,000 of 8 years 5% bonds on January 1, 2020, receiving net proceeds of $384,694. The bonds paid interest semi-annually on June 30 and December 31.

c) Temple Inc. issues $600,000 of 5% convertible bonds at par on December 31, 2020. The investment banker indicates that if the bonds had not been convertible they would have sold at 98. Spirit Inc. follows ASPE.

d) Richmond Ltd., which follows IFRS, issued $250,000 par value, 4% bonds on December 31, 2020. To help the sale, detachable stock warrants are issued at the rate of ten warrants for each $1,000 bond sold. It is estimated that the fair value of the bonds without the warrants is $234,000 and the fair value of the warrants is $40,000. The bonds with the warrants sold at 101.

Answer rating: 100% (QA)

a Azores Corporation January 1 2020 Debit Credit Cash 40000 Contributed SurplusC... View the full answer