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:

Optimum Standards

Ideal benchmarks set for performance, quality, or efficiency that are considered best under the given conditions.

Attainable Standards

Realistic targets for costs or productivity set by management, which are challenging yet achievable under normal working conditions.

Materials Quantity Variance

The deviation of the actual materials used from the expected standard quantity in production, times the standard unit cost.

Controllable Overhead Variances

The differences between the budgeted and actual overhead costs that management can control or influence.