Question: please help On 1 July 2022 Supertubes Ltd issues $50 million of convertible bonds to Magnatubes Ltd. The bonds have a life of three years,

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On 1 July 2022 Supertubes Ltd issues $50 million of convertible bonds to Magnatubes Ltd. The bonds have a life of three years, a face value of $10.00 each, and they offer interest, payable at the end of each financial year, at a rate of 8 per cent per annum. The bonds are issued at their face value and each bond can be converted into two ordinary shares in Supertubes Ltd at any time in the next three years. Organisations of a similar risk profile have recently issued debt with similar terms, but without the option for conversion. The market requires a rate of return of 10 per cent per annum on such securities. It is considered that investors in Supertubes Ltd are prepared to take a lower return (8 per cent) as a result of the facility to convert the bonds to equity. Provide the journal entries to account for: (a) the issue of the above securities (b) the payment of the first year's interest, and (c) the conversion of the securities to equity, assuming that the conversion takes place two years after the bonds are issued

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