An entity issued 2 million convertible notes on 1 July 2016. The notes have a four-year


term and were issued at $4 per note, giving total cash proceeds of $8 million. Interest is

payable annually in arrears at a rate of 8% per annum. Each note is convertible into one

ordinary share at or before maturity. When the notes were issued, the prevailing market

interest rate for similar debt without conversion options attached was 10% per annum.


Prepare the general journal entries to record the issue of the convertible notes so as to

enable the disclosures required under AASB 7.