On January $1,2022,$

Cai Ltd$.$ issued a $10\%$ convertible bond at par, with a face value of $100,000,$ maturing on January $1,2032($amounts in thousands$).$ The bond is convertible into ordinary shares of Cai at a conversion price of $2,500$ per share. Interest is payable annually. At date of issue, Cai could have issued at par non$-$convertible debt with a $10-$year term bearing an interest rate of $11\%.$

Instructions

a$.$ Prepare the journal entry to record the issuance of the convertible debt on January $1,2022.$

b$.$ On January $1,2025,$ Cai makes a tender offer to the holder of the convertible debt to repurchase the bond for $112,000,$ which the holder accepts. At the date of repurchase, Cai could have issued non$-$convertible debt with a $7-$year term at an effective$-$interest rate of $8\%.$ Prepare the journal entry to record this repurchase on January $1,2025.$