Question

Hondo inc, issued 1500 shares of 50$ per value convertible preferred stock at 80$ a share. Each preferred share may be converted to 6 shares of 10$ per common stock. The entry to record the conversion of all would include a

a.) debit to Preferred stock for $120,000

b.) debit to Additional paid-in Capital on Preferred stock for $90,000

c.) credit to Common stock for $120,000

d.) credit to Additional paid-in capital on common stock for $30,000

Answer 1

Solution:

Journal Entries - Hondo Inc.
Event	Particulars	Debit	Credit
1	Preferred stock Dr	$75,000.00
	Additional paid in capital - Preferred stock dr	$45,000.00
	To Common stock		$90,000.00
	To Additional paid in capital - Common stock		$30,000.00
	(To record conversion of preferred stock into common stock)

Therefore entry to record the conversion of all would include a "credit to Additional paid-in capital on common stock for $30,000"

Hence option d is correct.