Trevor had outstanding 40,000 shares of $30 par convertible preferred stock that had been sold at $50 a share. One-fourth of these shares were converted into common stock at the stated ratio of four shares of $5 par common stock (now selling at $15 a share) for each share of preferred stock.
Required:
a.Record the conversion of preferred into common stock.
b.Use the same information as in requirement a except assume that each share of preferred stock is convertible into two shares of $35 par common stock (now selling at $40 a share). Record this conversion of preferred into common stock.
c.Why did Trevor not have common stock converted into preferred stock?

Question

Trevor had outstanding 40,000 shares of $30 par convertible preferred stock that had been sold at $50 a share. One-fourth of these shares were converted into common stock at the stated ratio of four shares of $5 par common stock (now selling at $15 a share) for each share of preferred stock.
Required: 
a.Record the conversion of preferred into common stock.
b.Use the same information as in requirement a except assume that each share of preferred stock is convertible into two shares of $35 par common stock (now selling at $40 a share). Record this conversion of preferred into common stock.
c.Why did Trevor not have common stock converted into preferred stock?

Quizplus · Accepted Answer

The Answer of Trevor had outstanding 40,000 shares of $30 par convertible preferred stock that had been sold at $50 a share. One-fourth of these shares were converted into common stock at the stated ratio of four shares of $5 par common stock (now selling at $15 a share) for each share of preferred stock.
Required: 
a.Record the conversion of preferred into common stock.
b.Use the same information as in requirement a except assume that each share of preferred stock is convertible into two shares of $35 par common stock (now selling at $40 a share). Record this conversion of preferred into common stock.
c.Why did Trevor not have common stock converted into preferred stock?

Trevor Had Outstanding 40,000 Shares of $30 Par Convertible Preferred