Question: On 1 November 2018 Sandy Ltd issued 11100 convertible notes with the following features: Face value $1000 Term 4 years Issue price At face value

On 1 November 2018 Sandy Ltd issued 11100 convertible notes with the following features:

Face value $1000

Term 4 years

Issue price At face value

Interest Coupon rate of 11 per cent payable annually in arrears

Conversion option Each note is convertible into 111 ordinary shares

Market interest rate 13 per cent for similar debt with no conversion option

Required:

(a) Prepare the journal entry to record the issue of the convertible notes

(b) Describe the effect, if any, of the issue of the convertible notes on each of the three components of the statement of financial position, that is, assets, liabilities and equity.

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