On January 1, 2020, Jackson Inc. offers five-year, 9% convertible bonds with a par value of $1,000.

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Question:

On January 1, 2020, Jackson Inc. offers five-year, 9% convertible bonds with a par value of $1,000. Interest is paid annually on January 1. Each $1,000 bond may be converted into 500 common shares, which are currently trading at $3.50 per share. The effective interest rate on bonds is 10%. Jackson Inc. issues 1,500 bonds at par and allocates the proceeds under the residual method, using debt first with the remainder of the proceeds allocated to the option.

On January 1, 2022, right after the interest payment, Jackson Inc. offers an additional cash premium of $10,000 to the bondholders to convert. The bond’s fair value at the conversion time is $1,470,000, without the conversion feature. Jackson follows IFRS.

Required:

a. Record the entry(ies) for the bond issuance.

b. Record the entry(ies) for the bond conversion.

c. Assume now that Jackson follows ASPE. Record the entry(ies) for the bond conversion.