On January 1, 2018, Wassup Inc. (WI), an IFRS compliant company, issued
the following complex financial instrument for total cash proceeds of $6,200,000:

►$6,000,000 Convertible Bond bearing interest annually of 8%
►Each $1,000 bond certificate can be converted into 40 ordinary shares at any time before the bond's maturity date of December 31, 2021.
►The bond is callable at any time by WI at a call premium of 4% above par.
►The bond market yield is 9.5% for a non-convertible bond similar to WI's
 
Other relevant transactions occurred on the following dates:
December 31, 2019: Paid the interest due on the bond and recorded the appropriate amortization of the bond using the effective interest method.
January 1, 2020: One third of the bonds were converted at the option of the holders.
January 1, 2020: WI entered into a two year interest rate swap with DI Corp. WI receives 8% fixed on a notional amount of $4,000,000 and pays variable at prime +1% where prime is set at 7%. WI opts to not use hedge accounting for this swap contract.
December 31, 2020: Paid the interest due on the bond and recorded the appropriate amortization of the bond using the effective interest method.
January 1, 2021: Prime is reset to 5% on the swap contract. The swap contract value is $113,000.
January 1, 2021: $1,500,000 of the bonds (face value) were called in by WI.
December 31, 2021: Paid the interest due on the bond and recorded the appropriate amortization of the bond using the effective interest method.
December 31, 2021: The remainder of the bonds were settled as they matured on this date.
January 1, 2022: The swap contract was settled.

Required:
Prepare the journal entries for each date listed above. State if no entry is required.

Answer rating: 100% (QA)

Journal entries Date Account Title Debit Credit 2019 Dec 31 The re is no entries to record because t... View the full answer