On 1 July 2021 Aster plc issued 20,0003% convertible bonds at par of £100 each. Each bond is convertible into shares at the option of the holder at any time during the five year period of issue. Interest is paid annually on the bonds. If the conversion option is not exercised the bonds are repayable at par at the end of year 5. At the time of issue the interest rate for similar bonds with no conversion option was 5%. The finance manager has been told that these should be split between equity and liability in the financial statements but is not sure why this is or how they are to be accounted for. Required a) Explain why the bond should be split between equity and liability, referring to definitions of liability and equity where relevant. (6 marks) b) Show the split between equity and liability at 1 July 2021 together with the financial statement extracts for this bond for the year ended 30 June 2022. (14 marks) Total: 20 Marks