On January 1, 2018, TNT, Inc. issued 2,100 shares of $50 par value, convertible preferred shares for $200,000. Each preferred share is convertible into one share of $10 par common stock. On August 1, 2018, all preferred shareholders converted their shares into common stock. What is the necessary journal entry to record the August 1st transaction?

Question

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The preferred stock is recorded at par value ($50 x 2,100 = $105,000), and the excess amount ($200,000 - $105,000 = $95,000) is recorded as additional paid-in capital. Upon conversion, the common stock is recorded at par value ($10 x 2,100 = $21,000), and the remaining amount is recorded as additional paid-in capital for common stock.

On January 1, 2018, TNT, Inc Common Stock-Par 200,000 Preferred Stock 200,000\begin{array} { | l | r | r | } \hline \text { Common Stock-Par } & 200,000 & \\\hline \text { Preferred Stock } & & 200,000 \\\hline\end{array} Common Stock-Par Preferred Stock ​200,000​200,000​​

On January 1, 2018, TNT, Inc $\begin{array} { | l | r | r | } \hline \text { Common Stock-Par } & 200,000 & \\\hline \text { Preferred Stock } & & 200,000 \\\hline\end{array}$