China Corporation has the following shareholders' equity on December 31, 2021: Shareholders' equity
Share capital
$ 10 convertible preferred shares,
10,000 shares authorized, 5,000 shares issued $ 0,570,000
Common shares, no par value,
200,000 shares authorized, 90,000 shares issued 1,800,000
Total share capital 2,370,000
Retained earnings 450,000
Total shareholders' equity $ 2,820,000
If 500 preferred shares are converted into common shares what is the dollar value of the common shares issued?
A) $ 50,000
B) $ 57,000
C) $ 10,000
D) $ 9,000

Question

Quizplus · Accepted Answer

The conversion of 500 preferred shares into common shares would be valued at the same rate as the preferred shares, which is $57 per share ($570,000 / 10,000 shares). Therefore, 500 shares converted would be valued at 500 x $57 = $28,500, but since the question asks for the dollar value of common shares issued, it should be the same as the preferred shares' value, which is $57,000.

China Corporation Has the Following Shareholders' Equity on December 31