Conversion of bonds payable into common stock will:
A)decrease liabilities and decrease equity.
B)increase liabilities and increase equity.
C)decrease liabilities and increase equity.
D)increase liabilities and decrease equity.

Question

Quizplus · Accepted Answer

When bonds payable are converted into common stock, liabilities decrease because the bonds are no longer outstanding, and equity increases because common stock increases. Therefore, the correct answer is C: decrease liabilities and increase equity.

Conversion of Bonds Payable into Common Stock Will