On May 1, 2020, Fries Corporation issued P2,000,000, 20-year, 10% bonds for P2,120,000. Each P1,000 bond had a detachable warrant eligible for the purchase of one share of Fries’ P50 par ordinary share for P60. Immediately after the bonds were issued, Fries’ securities had the following market values: 10% bonds without warrants – P1,040; Warrant – P20; Ordinary share, P50 par – P56. What amount should Fries Corporation credit to Premium on Bonds Payable?   A. 80,000 B. 40,000 C. 120,000

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A:

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