Young Company issued 5,000 convertible bonds at the beginning of the current

year. The bonds had a four-year term with a stated rate of interest of 6%, and

were issued

at par

with a face value of P1,000 per bond. Interest is payable

annually on December 31. Each bond is convertible into 50 ordinary shares with

a par value of P10. The market rate of interest on similar nonconvertible bond is

9%. At the issuance date, the amount of P485,000 was credited to share

premium from conversion privilege.

The bonds were not converted and

instead, the entity paid off the convertible bondholders as maturity.

What

amount should be recorded as gain or loss on the full payment of the convertible

bonds at maturity?

a.

2,500,000 gain

b. 485,000 loss

c. 485,000 gain

d. 0