Immediately After the Last Interest Payment,Henry Company Converted $3,000,000 of Its

question 27

Multiple Choice

Immediately after the last interest payment,Henry Company converted $3,000,000 of its bonds into 300,000 shares of $10 par value common stock.The unamortized premium on the bonds at the date of the conversion was $870,000.As a result of this conversion:

• A)liabilities decreased by $3,870,000 and stockholders' equity increased by $3,000,000.
• B)liabilities decreased by $3,000,000 and stockholders' equity increased by $3,000,000.
• C)liabilities decreased by $3,870,000 and stockholders' equity increased by $3,870,000.
• D)liabilities decreased by $870,000 and stockholders' equity increased by $870,000.

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Definitions:

Analytic Thought

The process of solving problems using logical reasoning, often involving the breaking down of complex information into simpler components.

Analytic Thought

A cognitive process involving logical reasoning, comparison, classification, and evaluation to solve problems or understand concepts.

Concrete Operational

A stage in Piaget's theory of cognitive development in which children aged 7 to 11 years become capable of logical thought processes but are still limited to thinking about physical and concrete objects.

Intuitive

Pertaining to knowing or understanding something without the need for conscious reasoning; often relating to gut feelings or instincts.