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Chapter 16: Q3BE. (page 874)

Pechstein Corporation issued 2,000 shares of \(10 par value common stock upon conversion of 1,000 shares of \)50 par value preferred stock. The preferred stock was originally issued at \(60 per share. The common stock is trading at \)26 per share at the time of conversion. Record the conversion of the preferred stock

Short Answer

Expert verified

Debit, Preferred Stock, and Paid-in Capital in Excess of Par鈥� Preferred stock with $50,000 and $10,000, respectively. Credit the Common Stock and Paid-in Capital in Excess of Par鈥擟ommon Stock with $20,000 and $40,000.

Step by step solution

01

Following are the information given

Preferred Stock $50,000 (1,000 X $50)

Paid-in Capital in Excess of Par鈥� Preferred Stock $10,000 {($60 鈥� $50) X 1,000}

Common Stock $20,000 (2,000 X $10)

Paid-in Capital in Excess of Par鈥擟ommon Stock $40,000 {($60 X 1,000) 鈥� (2,000 X $10)}

02

Journal Entry

Date

Description

DEBIT

CREDIT

Preferred Stock

$50,000

Paid-in Capital in Excess of Par鈥� Preferred Stock

$10,000

Common Stock

$20,000

Paid-in Capital in Excess of Par鈥擟ommon Stock

$40,000

Being issue of common stock against preferred stock

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Most popular questions from this chapter

Question: (Issuance of Bonds with Stock Warrants) On May 1, 2017, Friendly Company issued 2,000 \(1,000 bonds at 102. Each bond was issued with one detachable stock warrant. Shortly after issuance, the bonds were selling at 98, but the fair value of the warrants cannot be determined.

Instructions

(a) Prepare the entry to record the issuance of the bonds and warrants.

(b) Assume the same facts as part (a), except that the warrants had a fair value of \)30. Prepare the entry to record the issuance of the bonds and warrants.

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