Question #3

Frazer Inc. issued $3,000,000 (par value), 8% convertible bonds at 107 at the time the similar straight bonds were selling at 104. Each $1,000 bond is convertible into thirty no par value common shares. The bonds pay interest on January 31 and July 31. On July 31, 2022, all bonds were converted while the market price of the bonds was 105, the market price of the common shares was $36, the carrying value of the common shares was $18 and the unamortized bond premium at the date of conversion was $102,000.

Instructions

Assume Frazer follows IFRS and decides to use the residual method and measure the debt first. Calculate the amount to be allocated to the bond and to the conversion rights.

Prepare the journal entry at the date of issuance of the bonds under IFRS.

Using the book value method, record the conversion on July 31, 2022,

How many shares were issued at the conversion?

Does Frazer have any other options to record the issuance of the convertible bounds? What options ASPE allows for the recording of issuance of the convertible bonds?