Reference no: EM132852266

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.

Base on the above data, answer the following: What 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