Patrick Rach International issued 5% bonds convertible into shares of the company's common stock. Rach applies International Financial Reporting Standards (IFRS). Upon issuance, Patrick Rach International should record:

Question

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Under IFRS, convertible bonds are considered a hybrid of both debt and equity. As such, the proceeds of the bond issue should be split into two parts: the portion attributable to the debt instrument (the bond) and the portion attributable to the equity instrument (the conversion option). Therefore, the bond proceeds should be split and recorded partly as a liability (debt) and partly as equity.

Patrick Rach International Issued 5% Bonds Convertible into Shares of the Company's