Answer:
Total amount should be credited to additional paid-in capital from common stocks as a result of the conversion of the preferred stock into common stock: $1,800,000 .
Explanation:
Please find the detailed calculations and explanations as below:
Total Cash amount received from preferred share issuance: 105 x 60,000 = $6,300,000;
The $6,300,000 will be credited into two owner's equity account:
- Common equity = Par value of common stock at the issuance of preferred stock date x Number of preferred stocks issued x Number of common stocks that one preferred stock has the right to converted into = 25 x 60,000 x 3 = $4,500,000.
- Paid-up capital account = Amount of cash receipt ( recorded as Debit) - Amount of common equity ( recorded as Credit) = 6,300,000 - 4,500,000 = $1,800,000 .
