Question

Wendy Inc. has 3,000 shares of $25 par value preferred stock outstanding. These preferred shares were originally issued at $60. Each preferred share is convertible into six shares of $5 par value common stock. The common stock is trading at $28 per share at the time of conversion. Prepare the journal entry, please show all work.

Answer 1

Date	Account Title	Debit $	Credit $
	Prefered Stock (3000 * $25)	$     75,000.00
	Additional Paid in capital - Preferred Stock (3000*($60-25))	$      1,05,000.00
	Common Stock (3000*6 shares * $5)		$90,000.00
	Additional Paid in capital - Common Stock		$90,000.00
	(To record conversion of preferred stock into common stock.)

Additional Paid in capital - Common Stock   = $75000 + 105,000 - 90,000 = $90,000

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