Immediately After the Last Interest Payment, Hoffman & Stuart Company

question 104

Multiple Choice

Immediately after the last interest payment, Hoffman & Stuart Company converted $2,500,000 of its bonds into 250,000 shares of $10 par value common stock. The unamortized premium on the bonds at the date of conversion was $86,625. The entry to record the conversion would include:

• A)liabilities decreased by $3,600,000 and stockholders' equity increased by $3,440,000.
• B)liabilities decreased by $3,440,000 and stockholders' equity increased by $3,600,000.
• C)liabilities decreased by $3,600,000 and stockholders' equity increased by $3,400,000.
• D)liabilities decreased by $3,440,000 and stockholders' equity increased by $3,440,000.

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Definitions:

Expiration Date

The specific date on which an options or futures contract becomes void and the holder must settle their position by either selling or exercising the contract.

Indefinite Future

A period without a specified end time, often used in planning or forecasting where the exact timeline is unknown.

Call Option Values

The price of a call option, which grants the holder the right (but not the obligation) to buy an underlying asset at a specified price before a specified date.

Dividend-Payout Policies

The strategies and guidelines a company uses to decide how much of its earnings will be paid out to shareholders as dividends.