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On May $31,2022$ alfer the semi$-$annual interest payment was made, Guft Corp. had the following information available regarding its convertble bonds:

$.$ $$3,000,000$ of convertible bonds outstanding.

The bonds pay $7\%$ inlerest semiannually on the last days of May and November.

Each $$1,000$ bond is convertible into $29$ common shares with no par value.

On May $31,2022,$ $$66,000$ of bonds were converted.

Market value of the bonds on conversion date was $109.$

Market price of the common shares on conversion date was $$34.$

Carrying value of the common shares on conversion date was $$17.$

The Contribuled surplus $-$ convertiole bonds options account had a balance of $$480,000.$

The total unamortized premium on May $31,2022$ was $$264,000.$

The remainder of the bonds were retired at maturity having never been converted.

Gulf Corp. uses the book value method to record comersion and amortization of premium.

Gulf Corp. uses the residual method to value and record the debt and equity components of the convertible debt when it was issued.

Enter an appropriate description when entering the transactions in the journal. Dates must be entered in the format dd$/$mmm $($ie$.$ January $15$ would be $\frac{15}{?}$ Jan$).$ Please make sure your final answer$($s$)$ are accurate

to $2$ decimal places.

a$)$ Prepare the journal entry on May $31,2022$ to record bond conversion.

Marking:

'Bonds payable' should be debited for the amount of $$71,808,$ but you have not done this. This will cost you $1$ mark.

Face value of bond converted

$$3,000,000$

Premium as of May $31,2022$ for $$3,000,000$ of bonds $$264\mathrm{.}000$

Carrying value of bond corverted $$3,264,000$

Bonds payable $=\frac{\text{\$}66,000}{\text{\$}3,000,000}$$$3,264,000=$$$71,808$

You have not included the 'Contributed surplus $-$ corvertble bonds options' account in this joumal entry. This will cost you $2$ marks.

You have not included the 'Common shares' account in this joumal entry. This will cost you $2$ marks.

'Cash' should not have been included in this joumal entry. Any amounts entered for this account will not be evaluated.

b$)$ Assume now that in addition to the data presented in part a$),$ that Gulf Corp. included an additional sweetener of $$15,000$ cash at the time of conversion. Prepare the journal entry to record the

bond conversion.

Marking:

'Bonds payable' should be debited for the amount of $$71,808,$ but you have not done this. This will cost you $1$ mark.

You have not included the 'Contributed surplus $-$ corverfible bonds options' account in this joumal entry. This will cost you $2$ marks.

You have not included the 'Loss on redemption of bonds' account in this joumal entry. This will cost you $2$ marks.

You have not included the 'Retained eamings' account in this joumal entry. This will cost you $2$ marks.

You have not included the 'Common shares' account in this joumal entry. This will cost you $2$ marks.

'Cash' should be credited for the amount of $$15,000,$ but you have not done this. This will cost you $1$ mark.

c$)$ Prepare the entry at maturity to retire the remaining bonds, assuming the final interest payment has been made and the maturity date is May $31.$

Marking:

You have not included the 'Contributed surplus $-$ comvertble bonds options' account in this joumal entry. This will cost you $2$ marks.

'Cash' should be credited for the amount of $$2,934,000,$ but you have not done this. This will cost you $1$ mark.

You have not included the 'Contributed surplus $-$ expired options' account in this journal entry. This will cost you $2$ marks.

'Insurance expense' should not have been included in this journal entry. Ary amounts entered for this account will not be evaluated.

Note: Bonds payable and cash are recorded at the remaining face value of the bonds because the final interest payment has been made, and therefore the discoundpremium has been amortized complelely.

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