Convertible Preferred Stock On January 2, 2013, Bray Corporation issues 900 shar
ID: 2490191 • Letter: C
Question
Convertible Preferred Stock
On January 2, 2013, Bray Corporation issues 900 shares of $100 par convertible preferred stock for $117 per share. On January 7, 2014, all the preferred shareholders convert their shares to common stock.
1. Prepare the January 2, 2013, journal entry to record the issuance of the preferred stock.
2. Prepare the January 7, 2014, journal entry to record the conversion , assuming the preferred stock contract states
a. each share of preferred stock is convertible into 7 shares of $10 par common stock
b. each share of preferred stock is convertible into twelve shares of $10 per common stock
Explanation / Answer
Journal entries
Cash
105,300
To Preferred stock(900*100)
90,000
To Additional paid in capital
(900*17)
15,300
Preferred stock
90,000
Additional paid in capital
15,300
To Common stock (900*7*10)
63,000
To Additional paid in capital Preferred stock conversion
42,300
Preferred stock
90,000
Additional paid in capital
15,300
Retained earnings
2,700
To Common stock
(900*12*10)
108,000
Cash
105,300
To Preferred stock(900*100)
90,000
To Additional paid in capital
(900*17)
15,300
Preferred stock
90,000
Additional paid in capital
15,300
To Common stock (900*7*10)
63,000
To Additional paid in capital Preferred stock conversion
42,300