Choice "B" is correct. Under the book value method of exchanging convertible bonds for stock, the book value of the bonds is reallocated to the par value and the additional paid-in capital accounts of the common stock. Thus, stockholders' equity is increased.
Choice "d" is incorrect. Converting bonds to common stock either has no effect on additional paid-in capital (if the bonds' book value equaled the common stocks' par value) or increases additional paid-in capital.
Choice "c" is incorrect. Only the bond accounts and the common stock accounts are affected under the book value method of exchanging convertible bonds for common stock.
Choice "a" is incorrect. No gain or loss is recognized under the book value method.