Question 01 A company issues 5% convertible bonds at their nominal value of $ 6 million.
The bonds are convertible at any time up to maturity into 500 ordinary shares. Alternatively the
bonds will be redeemed at par after 3 years.
Similar nonconvertible bonds would carry an interest rate of 7%.
The present value of $1 payable at the end of year, based on rates of 5% and 7% are as follows:
End of year
5%
7%
1
0.935
0.952
0.907
2.
0.873
3
0.864
0.816
Requirement:
1. What amounts will be shown as a financial liability and as equity when the convertible bonds ar
issued?
2. What amounts will be shown in the income statement and Statement of Financial Position for
years 1-3?

The amberssen specialty company is a chain of twelve retail stores that sell a variety of imported gift items, gourmet chocolates, cheeses, and wines in the toronto area. amberssen has an is staff of three people who have created a simple but effective information system of networked point-of-sale registers at the stores and a centralized accounting system at the company head- quarters. harry hilman, the head of amberssens is group, has just received the following memo from bill amberssen, sales director (and son of amberssen’s founder). harry—it’s time amberssen specialty launched itself on the internet. many of our competitors are already there, selling to customers without the expense of a retail storefront, and we should be there too. i project that we could double or triple our annual revenues by selling our products on the internet. i’d like to have this ready by - giving, in time for the prime holiday gift-shopping season. bill after pondering this memo for several days, harry scheduled a meeting with bill so that he could clarify bill’s vision of this venture. using the standard con- tent of a system request as your guide, prepare a list of questions that harry needs to have answered about this project.