Immediately after the last interest payment, Henry Company converted $2,700,000

Question

Immediately after the last interest payment, Henry Company converted $2,700,000 of its bonds into 270,000 shares of $10 par value common stock. The unamortized premium on the bonds at the date of the conversion was $900,000. As a result of this conversion O A. liabilities decreased by $3,600,000 and stockholders' equity increased by $3,600,000. 0 B. liabilities decreased by $3,600,000 and stockholders' equity decreased by $3,600,000. O C. liabilities decreased by $900,000 and stockholders' equity increased by $900,000. O D. liabilities decreased by $2,700,000 and stockholders' equity increased by $2,700,000.

Explanation / Answer

Journal entry :

So answer is a) Liabilities decreased by $3600000 and Stockholder's equity increased by $3600000

Date accounts & explanation debit credit Bonds payable 2700000 Premium on bonds payable 900000 Common Stock (270000*10) 2700000 Paid in capital in excess of par value-Common Stock 900000

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