Question

Sarasota Corporation issued 2,200 shares of $10 par value common stock upon conversion of 1,100 shares of $50 par value preferred stock. The preferred stock was originally issued at $64 per share. The common stock is trading at $25 per share at the time of conversion. Record the conversion of the preferred stock.

Answer 1

Journal entry

Step-by-step explanation:

The journal entry is as follows

Preferred Stock $55,000 (1,100 shares × $50)

Paid in capital Preferred Stock $15,400 {1,100 shares × ($64 - $50)}

To Common Stock $22,000 (2,200 shares × $10)

To Paid in capital common stock Additional $48,400

(Being the conversion of the preferred stock is recorded