Question: On January 1, 2004, Dramatic Inc. issued convertible bonds with conversion to take place on or before the expiry of two years from the date

On January 1, 2004, Dramatic Inc. issued convertible bonds with conversion to take place on or before the expiry of two years from the date of issuance of the debt. On December 15, 2005, the board of directors of Dramatic Inc. decided to convert the bonds at year-end and issue equity shares.

Required

How would Dramatic Inc. treat this transaction in its cash flow preparation?

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