Question

High PG Ltd is a production company with an average return on assets of 8.0% and an average cost of debt of 7.7%. The company needs to raise additional funds in a competitive market environment. The Balance Sheet shows the company is currently financed as follows:

Equity and Liabilities
Position		AUD
Current Liabilities	$	33,033,000
Non-Current Liabilities	$	9,317,000
Total Liabilities	$	42,350,000
Share Capital	$	85,425,000
Accumulated losses	$	(28,475,000)
Total equity	$	56,950,000

	High PG Ltd Convertible Bond
Instrument		Convertible Bond
Issue size		AUD 15million
Coupon		5%, annual payment
Settlement date		01-January-2019
Maturity date		31-December-2021
Conversion rate		15million $1 shares at maturity
		Without the conversion feature, the
Note		bond would be priced the same as the
		corporate Bond.

Question: Provide the journal entries for the High PG Ltd Convertible Bond from 1 January 2019 to 31 December 2021. Refer to the specific Australian accounting standards. Assume the bond is converted at maturity.

Answer 1

DATE PARTICULARS AMOUNT ( IN AUD MILLIONS )

01.JAN.2019 BANK A/C DR 15.00

TO 5 % CONVERTIBLE BONDS 15.00

( BEING BONDS HAVE BEEN ISSUED )

31.DEC.2019 INTEREST A/C DR 0.75

TO BANK A/C 0.75

( BEING INTEREST PAID )   

31.DEC 2020 INTEREST A/C DR 0.75

TO BANK A/C 0.75

( BEING INTEREST PAID )

31 DEC 2021 INTEREST A/C DR 0.75

TO BANK A/C 0.75

( BEING INTEREST PAID )   

31 DEC 2021 5 % CONVERTIBLE BONDS A/C DR 15.00

TO BANK A/C 15.00

( BEING BONDS REDEEMED )