In 2011, Wyatt Corporation issued for $110 per share, 15,000 shares of $100 par value convertible preferred stock. One share of preferred stock may be converted into three shares of Wyatt's $25 par value common stock at the option of the preferred shareholder. On December 31, 2012, all of the preferred stock was converted into common stock. The market value of the common stock at the conversion date was $40 per share. What amount should be credited to the common stock account on December 31, 2012?

Question

Quizplus · Accepted Answer

The correct answer is A.The conversion of preferred stock into common stock results in the cancellation of the preferred stock and the issuance of common stock. The amount credited to the common stock account is equal to the par value of the common stock multiplied by the number of shares issued. In this case, the par value of the common stock is $25 and the number of shares issued is 15,000 * 3 = 45,000. Therefore, the amount credited to the common stock account is $25 * 45,000 = $1,125,000.

In 2011, Wyatt Corporation Issued for $110 Per Share, 15,000