Reference no: EM132817837

Question - 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.

Required - Base on the above data, answer the following: (Carry all decimal places in computing for the present value)

Find the net increase (or decrease) in the share premium as a result of the conversion of the bonds on December 31, 2018.

a. Nil

b. 500,000

c. 315,000

d. 2,100,000