On March 31, 2018, Ashley, Inc

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 less than the fair value but greater than the par value of the common stock issued. If Ashley used the book value method of accounting for the conversion, which of the following statements correctly states an effect of this conversion?

A) Shareholders' equity is increased.
B) Additional paid-in capital is decreased.
C) Retained earnings is increased.
D) A loss is recognized.

Correct Answer:

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