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Intermediate Accounting: Reporting...

3rd Edition
James M. Wahlen + 2 others
ISBN: 9781337788281

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BuyFindarrow_forward

Intermediate Accounting: Reporting...

3rd Edition
James M. Wahlen + 2 others
ISBN: 9781337788281
Textbook Problem
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Convertible Preferred Stock On January 2, 2019, Bray Corporation issues 900 shares of $100 par convertible preferred stock for $117 per share. On January 7, 2020, all the preferred shareholders convert their shares to common stock.

Required:

  1. 1. Prepare the January 2, 2019, journal entry to record the issuance of the preferred stock.
  2. 2. Prepare the January 7, 2020, journal entry to record the conversion, assuming the preferred stock contract states that:
  3. a. each share of preferred stock is convertible into 7 shares of $10 par common stock
  4. b. each share of preferred stock is convertible into 12 shares of $10 par common stock

1.

To determine

Prepare a journal entry to record the issuance of the preferred stock.

Explanation

Preferred stock: The stock that provides a fixed amount of return (dividend) to its stockholder before paying dividends to common stockholders is referred as preferred stock.

Prepare a journal entry to record the issuance of the preferred stock:

DateAccount Titles and ExplanationPost Ref.Debit ($)Credit ($)

January

02,2019

Cash ($117×900share) 105,300 
    Preferred Stock, 100 par ($100×

2 (a)

To determine

Prepare a journal entry to record the conversion of preferred stock into 7 shares of common stock, $10 par.

2 (b)

To determine

Prepare a journal entry to record the conversion of preferred stock into 12 shares of common stock, $10 par.

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