Jabieb corporation issued 3,000 convertible bonds on January 1, 2018. The bonds have a 3-year life and

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Jabieb corporation issued 3,000 convertible bonds on January 1, 2018. The bonds have a 3-year life and are issued at par with a face value of $1,000 per bond, giving total proceedings of $3,000,000. Interest is payable annually at 6%. Each bond is convertible into 200 ordinary shares (par value $1). The market rate of interest on similar non-convertible debt is 8%

a) Compute the liability and equity component of the convertible bond on January 1, 2018. (5 marks)

b) Assume the bond is converted on January 1, 2019, compute the carrying value of the bond payable on

January 1 2019. (2 marks)

c) Prepare the journal entry to record the conversion on January 1, 2019. (4 marks).

d) Assume that the bonds were repurchased on January 1, 2019 for $2,900,000 cash instead of being

converted. The net present value of the bonds on January 1, 2019 is $2,850,000. Prepare the journal entry

to show the repurchase on January 1, 2019. (4 marks)

Josh Company had 200,000 ordinary shares outstanding on December 31, 2017. The company issued 20,000 shares on April 1, 2018 and retired 10,000 shares on September 1, 2018. Josh company recorded net income for the year ended December 31, 2018 of $300,000 after a loss on discontinued operations of $35,000 (net of tax). (5 marks)