Lloyd Corporation has $2,400,000 of bonds outstanding with an unamortized premium of $120,000 immediately following the last interest payment.At that time,the bonds were converted into 250,000 shares of $10 par value common stock.As a result of this conversion:
A)liabilities decreased by $2,280,000 and stockholders' equity increased by $2,280,000.
B)liabilities decreased by $2,400,000 and stockholders' equity increased by $2,400,000.
C)liabilities decreased by $2,520,000 and stockholders' equity increased by $2,520,000.
D)liabilities increased by $2,280,000 and stockholders' equity increased by $2,280,000.

Question

Quizplus · Accepted Answer

The bonds' book value is $2,400,000 + $120,000 = $2,520,000. Upon conversion, liabilities decrease by this amount, and stockholders' equity increases by the same amount.

Lloyd Corporation Has $2,400,000 of Bonds Outstanding with an Unamortized