Question

Pechstein Corporation issued 2,090 shares of $13 par value common stock upon conversion of 1,070 shares of $45 par value preferred stock. The preferred stock was originally issued at $58 per share. The common stock is trading at $26 per share at the time of conversion. Record the conversion of the preferred stock.

Answer 1

Preferred Stock 48,150 debit

Additional Paid In PS 13,910 debit

Common Stock 27,170 credit

Additioanl Paid.in CS 34,890 credit

Step-by-step explanation:

2,090 shares x $13 = $27,170

Preferred stock 1,070 x $45 = $48,150

Additional Paid.in Preferred stock 1,070 x (58 - 45) = 13,910

The common stock will use additional paid.in for the differnece between the value of the preferred stock and the new common stock