On January 2, 20X1, Cannon Company issued $10,000,000 of convertible debt. The bonds are zero-coupon, and each $1,000 bond is convertible into 10 shares of Cannon Company’s common stock at the bond holder’s option. The bonds mature in 20X5 and were issued at par. Companies with similar credit profiles were issuing non-convertible debt at an effective rate of interest of 8%. The present value factor for $1 for 5 periods at 8% is .68058. For each of the following assumptions, prepare the journal entry to record the issuance of debt and entries for 20X1 and 20X2 to record interest expense. No bonds were converted during 20X1 or 20X2. Required:

Cannon Company uses U. S. GAAP to prepare its external financial reporting to shareholders and regulators.

Cannon Company uses IFRS to prepare its external financial reporting to shareholders and regulators.