Lopez, Inc. issued 500 shares of$50 par value convertible preferred stock at S80
ID: 2546564 • Letter: L
Question
Lopez, Inc. issued 500 shares of$50 par value convertible preferred stock at S80 a share. Each preferred share may be converted to 6 shares of $10 par common stock. The entry to record the conversion of all shares would include a a. debit to Preferred Stock for $30,000X b. debit to Additional Paid-in Capital on Preferred Stock for $40,000 9· credit to Common Stock for $25,000 X credit to Additional Paid-in Capital from Preferred Stock Conversion for $10,000 10. Enterprise Leasing issued 500 shares of $20 par value convertible preferred stock at $22 per share. Each preferred share is converted to 7 shares of $4 par value common stock. The entry to record this conversion would include a debit to Additional Paid-in Capital on Preferred Stock for $11,000 PIC P credit to Common Stock foxr $11,000 debit to Retained Earnings for $3,000 d. credit to Additional Paid-in Capital from Preferred Stock Conversion for $3,000 11. Wade, Inc. issued 500 shares of $10 par preferred stock at 583 a share. Each share had a warrant attached that allowed the holder to purchase one share of $5 par common stock for $15. Soon after the preferred stock was issued, the preferred stock was selling ex-rights for $64 a share and the warrants for $16 each. The entry to record the issuance of the preferred stock would include a a. debit to Retained Earnings for $8,300 b. credit to Additional Paid-in Capital on Preferred Stock for $36.500 c. credit to Common Stock Warrants for $8,300 d. credit to Additional Paid-in Capital on Common Stock for $8,300 12. When recording the conversion of preferred stock into common stock, if the total contributed capital eliminated in regard to the preferred stock is less than the common stock par value, the difference is debited a. Additional Paid-in Capital on Preferred Stock b. Additional Paid-in Capital on Common Stock eckrces ehained Common Stock becou Retained Earnings ibuhenteie 13. When callable preferred stock is recalled, if the recall price exceeds the total of the par value in the preferred stock account and the additional paid-in capital associated with the recalled preferred stock, the difference is a. credited to Retained Earnings b credited to Additional Paid-in Capital on Preferred debited to Retained Earnings tee that eheenao etc ited to Loss from Recall of Preferred Sick 14. Wang Compotion fisued 8,00 sharesk at a haresok warmi atiched to each preferred share allows the holder to buy one share of S10 par common stock for $20. Right after issuance, the preferred stock sells ex-rights for $63 per share. The warrants began selling at $7 per warrant The amount credited to Common Stock Warrants at issuance of the preferred stock is d. $160,000 /32,800 04,000+5,0%Explanation / Answer
9) Preferred Stock Coverted from 500*80=40000 to equity stock $30000 Balance would be $10000 in the form of additional paid in capital (40000-30000) =10000 So the answer is D
Preferrred stock A/C –Dr 40000
To Equity Stock A/C – Cr 30000
To Additional Paid in Capital A/c – Cr10000
10) Answer is C Refer to the journal Entry
Preferred Stock A/C- Dr 22*500= 11000
Retained Earnings A/c(bal fig) Dr 3000
To Equity stock A/C – Cr 500*7*4=14000
11)Answer is B
Total Cash Received = 83*500= 41500
Shares issued at $15 where as par value 5$ . therefore the equity element would be (15-5)$10 per share 10*500=5000
So therefore preffered stock = 41500-5000=36500
12)Answer is D
Preferred stock debit say 100
To Equity stock element credited say 200
So the balance would be debited to retained earnings . Credit side is more than debit side.
13)Answer is B
Say recal price is $15
Par value is $5. (lower than the recall price) so the company has to pay more than at which it had earlier issued the share. So the company would face a loss which would be debited to retained earnings.
14)Total Cash Raised = 74*8000=592000
Preferred Stock @50= 8000*50= 400000
Additional Paid in Capital = ?
Equity Stock = ?
Ex right price = 63*8000=504000
Rights value = 7 So therefore =7*8000=56000
Total = 504000+56000=560000
Out of balance of 192000(592000-400000)
Portion of preferred stock (APIC) = 192000*504000/560000= 132800
Portion of common stock = 56000*192000/560000=59200
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