Answered: Conversion of Preferred Stock into…

Intermediate Accounting: Reporting And Analysis

3rd Edition

ISBN:9781337788281

Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Chapter15: Contributed Capital

Section: Chapter Questions

Problem 5MC

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Conversion of Preferred Stock into Common Stock

Evans & Sons, Inc., has 20,000 shares of $100 par value, six percent preferred stock and 100,000 shares of $1.00 par value common stock outstanding. The preferred stock is convertible into the company’s common stock at a conversion rate of 1-to-20; that is, each share of preferred stock is convertible into 20 shares of common stock. The preferred stock had been sold for its par value when issued. Prepare the journal entry to record the conversion of all of the company’s preferred stock into common stock.

General Journal
Ref.	Description	Debit	Credit
a.	Answer	Answer	Answer
	Answer	Answer	Answer
	Additional Paid-in-Capital in excess of par value.	Answer	Answer
	To record conversion of preferred stock to common stock.