Miron Construction Ltd$.$ offers five$-$year, $8\%$ convertible bonds $($par $$1,000).$ Interest is paid annually

on the bonds. Each $$1,000$ bond may be converted into $100$ common shares, which are currently

trading at $$8$ per share. Similar straight bonds carry an interest rate of $10\%.$ One thousand bonds are

issued at $101.$

Instructions

a$)$ Assume Miron Construction Ltd$.$ follows IFRS and decides to use the residual method and

measures the debt first. Calculate the amount to be allocated to the bond and to the option.

b$)$ Prepare the journal entry at the date of issuance of the bonds under IFRS.

c$)$ Assume that after three years, when the carrying amount of the bonds was $$965,290,$ one$-$half of

the holders of the convertible debt decided to convert their convertible bonds before the bond

maturity date. Prepare the journal entry to record the conversion.

d$)$ How many shares were issued at the conversion?

e$)$ Assume now that Miron follows ASPE and has chosen as an accounting policy to value the equity

component at zero. Prepare the journal entry at the date of issuance of the bonds.