Prepare the general journal entry to record the issue of convertible notes in accordance with the requirements of AASB 132.

1.Glenelg Ltd issued 2 million 7% six-year $2.20 convertible notes at a time when the market interest rate for similar securities without the conversion option was 9% per annum.

 

Required

How would you record the issue of these notes, following:

(a) the requirements of Framework 2014?

(b) the requirements of AASB 132? (LO4, LO5)

2. In order to expand its business, Zest Ltd issued 30 000 convertible notes with a face value of

$27 million for a term of four years on 30 June 2016. Each of the 30 000 notes was issued at

its face value of $900. The coupon interest rate is 6.7% per annum. Except for the interest rate

and the conversion feature, all the terms of the convertible note are the same as the terms of

outstanding issues of otherwise comparable non-convertible debt. The market interest rate

for otherwise comparable non-convertible debt is 10% per annum.

Required

(a) Prepare the general journal entry to record the issue of convertible notes in accordance

with the requirements of AASB 132.

(b) Assume that the notes are converted into ordinary shares at the end of the first year

ending 30 June 2017 (after receiving interest payments). Prepare any necessary

general journal entries in accordance with AASB 132.

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