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Pechstein Corporation issued 2,000 shares of \(10 par value common stock upon conversion of 1,000 shares of \)50 par value preferred stock. The preferred stock was originally issued at \(60 per share. The common stock is trading at \)26 per share at the time of conversion. Record the conversion of the preferred stock

Short Answer

Expert verified

Debit, Preferred Stock, and Paid-in Capital in Excess of Par— Preferred stock with $50,000 and $10,000, respectively. Credit the Common Stock and Paid-in Capital in Excess of Par—Common Stock with $20,000 and $40,000.

Step by step solution

01

Following are the information given

Preferred Stock $50,000 (1,000 X $50)

Paid-in Capital in Excess of Par— Preferred Stock $10,000 {($60 – $50) X 1,000}

Common Stock $20,000 (2,000 X $10)

Paid-in Capital in Excess of Par—Common Stock $40,000 {($60 X 1,000) – (2,000 X $10)}

02

Journal Entry

Date

Description

DEBIT

CREDIT

Preferred Stock

$50,000

Paid-in Capital in Excess of Par— Preferred Stock

$10,000

Common Stock

$20,000

Paid-in Capital in Excess of Par—Common Stock

$40,000

Being issue of common stock against preferred stock

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