Company A issued convertible notes 3 years ago and accounted for them as a compound financial instrument.Complete the following: at the end of the three year period the portion of the ______ component that relates to the notes which have been converted ______.
A)liability; remains as a liability
B)liability; is transferred to equity
C)equity; is transferred to profit or loss
D)liability; is transferred to profit or loss

Question

Quizplus · Accepted Answer

When convertible notes are converted into equity, the liability component of the compound financial instrument is transferred to equity. Therefore, at the end of the three-year period, the portion of the liability component that relates to the notes which have been converted should be transferred to equity.

Company a Issued Convertible Notes 3 Years Ago and Accounted