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What gains on the conversion of the bonds on december

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Reference no: EM132825444

On January 1, 2016, Dumaguete Co. issued its, 3,000, ?1,000, 12%, 5-year at the prevailing rate of interest of the bonds of 9%. Interest is payable every December 31.

  • On December 31, 2017, after payment of interest, 1/2 of the bonds were retired at ?1,900,000 when the fair value of securities is ?450. The prevailing rate of interest of the bonds is 11%.
  • On December 31, 2018, after the payment of interest, the remaining bonds were converted into ?40 par value, 5,000 ordinary shares when the fair value of the securities is ?460. The bonds were converted because of equity swap.

Problem 1: The gains (or loss) on the conversion of the bonds on December 31, 2018.

a. Nil
b. 750,000 gain
c. 310,000 gain
d. 720,839 loss

Reference no: EM132825444

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