A corporation issues $100,000,000 of 10% convertible debentures, convertible at $50. Upon issuance, all of the following are affected EXCEPT:
A. Total Assets
B. Total Liabilities
C. Net Working Capital
D. Stockholders' Equity
D. Stockholders' Equity
When bonds are issued, the corporation receives the cash from the sale (increasing current assets) and shows the long term liability to repay the bonds (increasing long term debt). Therefore, Total Assets increase; Total Liabilities increase; and Net Working Capital increases because of the increase in current assets. Stockholders' Equity is unaffected since only a profit or loss, or the sale of new equity securities, or the declaration of a cash dividend, will cause a change in Stockholders' Equity.
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