Question

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

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

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)}

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