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On March 31, 2018, Ashley, Inc.\'s bondholders exchanged their convertible bonds

ID: 2520136 • Letter: O

Question

On March 31, 2018, Ashley, Inc.'s bondholders exchanged their convertible bonds for common stock. The book value of these bonds on Ashley's books was greater than the par value of the common stock issued upon conversion. If Ashley used the book value method of accounting for the conversion, which of the following statements correctly states an effect of this conversion? Select one: A. A loss is recognized. B. Retained earnings is increased. C. Additional paid-in capital is increased. D. Shareholders' equity is decreased.

Explanation / Answer

Additional paid in capital is increased to the amount of difference. Option C is correct

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