stock at $90 per share. Each share is convertible into four shares of $10 par co

Question

stock at $90 per share. Each share is convertible into four shares of $10 par common stock Required: a. Prepare the journal entry to record the issuance of the stock on January 3,2016. b. On March 5, 2018, each share of preferred was converted. Prepare the journal entry to record this conversion Assume that instead of the above circumstances regarding conversion, the company agrees to convert each share of preferred into ten shares of $10 par common stock on M 2018. Prepare the journal entry to record this conversion c. arch S,

Explanation / Answer

Part a

Jan 3 Cash Dr. 360000 To Preferred Stock(4000x50) 200000 To addtitional contributed capital (4000x40)- 160000

Part b

Mar5,18 Preferred Stock Dr 200000 To common stock 160000 To additional contributed capital- 40000

Note- common stock value= 4 shares for every share means 4000x4=16000 shares for 10 each. hence 160000

Part c

Mar5,18   Preferred Stock Dr 200000 Addtional Contributed capital Dr 200000 To Common Stock 400000

Note- Common stock value= 10 shares for every share= 10x4000= 40000 shares of 10 each= 400000

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