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

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.