Which of the following is correct regarding the im

Ans:C.
The conversion of convertible debt into common equity uses the additional paid-in capital account as a balancing account.No gain or loss is recorded when convertible bonds are converted into common equity.
A is incorrect.The issuance of convertible bonds by a company results in a increased, not decreased, debt-to-equity ratio (convertible bonds are debt until they are converted) and a decreased interest coverage ratio due to the higher interest associated with the increased debt.
B is incorrect.The conversion of convertible bonds into common equity results in lower debt and higher equity balances, as well as lower interest expense in the future due to the reduced debt.The reduced debt and increased equity result in a lower debt-to-equity ratio.The decrease in interest expense results in an increased interest coverage ratio.