Immediately after the last interestpayment, Henry Company converted$2,700,000 of its bonds into270,000 shares of$10 par value common stock. The unamortized premium on the bonds at the date of the conversion was$900,000. As a result of thisconversion:

A.

liabilities decreased by$3,600,000 andstockholders' equity increased by$3,600,000.

B.

liabilities decreased by$900,000 andstockholders' equity increased by$900,000.

C.

liabilities decreased by$3,600,000 andstockholders' equity decreased by$3,600,000.

D.

liabilities decreased by$2,700,000 andstockholders' equity increased by$2,700,000.