Question

Pechstein Corporation issued 2,090 shares of $13 par value common stock upon conversion of 1,070 shares of $45 par value preferred stock. The preferred stock was originally issued at $58 per share. The common stock is trading at $26 per share at the time of conversion. Record the conversion of the preferred stock.

Answer 1

Answer:

Preferred Stock          48,150 debit

Additional Paid In PS  13,910 debit

     Common Stock                      27,170 credit

    Additioanl Paid.in CS            34,890 credit

Explanation:

2,090 shares x $13 =   $27,170

Preferred stock 1,070 x   $45  = $48,150

Additional Paid.in Preferred stock 1,070 x (58 - 45) = 13,910

The common stock will use additional paid.in for the differnece between the value of the preferred stock and the new common stock