Question

Smith & Sons, Inc., has 17,000 shares of $100 par value, six percent preferred stock and 80,000 shares of $0.50 par value common stock outstanding. The preferred stock is convertible into the company's common stock at a conversion rate of 1-to-20; that is, each share of preferred stock is convertible into 20 shares of common stock. The preferred stock had been sold for its par value when issued. Prepare the journal entry to record the conversion of all of the company's preferred stock into common stock.

General Journal
Ref.	Description	Debit	Credit
a.	AnswerPreferred StockCommon StockAdditional Paid-in-Capital in excess of par value.	Answer	Answer
	AnswerPreferred StockCommon StockAdditional Paid-in-Capital in excess of par value.	Answer	Answer
	Additional Paid-in-Capital in excess of par value.	Answer	Answer
	To record conversion of preferred stock to common stock.

Answer 1

Ref.	Description	Debit	Credit
a.	Preferred stock (17,0000 X $100)	$1,700,000	-
	Common stock (17,000 X 20 X $0.5)	-	$170,000
	Additional Paid-in-Capital in excess of par value (Bal fig)	-	$1,530,000
	To record conversion of preferred stock to common stock