Immediately After the Last Interest Payment, Hoffman & Stuart Company

question 67

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 $940,000. The entry to record the conversion would include:

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

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