Question

# This is intermediate accounting question about Stockholder's Equity (chp15) On January 1, 2015, Kelsey issued 600,000...

This is intermediate accounting question about Stockholder's Equity (chp15)

On January 1, 2015, Kelsey issued 600,000 of its \$10 par value, 6% preferred stock for \$20 per share. Kelsey incurred and paid stock issuance costs of \$150,000. Each share of Kelsey’s preferred stock can be converted into 3 shares of Kelsey’s \$1 par value common stock. On August 15, 2015, when 1 share of Kelsey’s common stock was trading for \$10 per share, 300,000 shares of the preferred stock were converted into common stock. On December 31, 2015, when 1 share of Kelsey’s preferred stock was trading for \$12 per share, Kelsey declared the annual preferred stock dividend. Prepare the entries Kelsey should make on:

• January 1, 2015.
• August 15, 2015.
• December 31, 2015.

Solution:

 Date Particulars Debit(\$) Credit(\$) Calculations Jan 01, 2015 Cash A/c Dr \$11,850,000 (600,000*20) - 150,000 To preferred stock A/c \$6,000,000 (600,000*10) To Additional paid in capital in excess of par preferred A/c \$5,850,000 Aug 15, 2015 Preferred stock A/c Dr \$3,000,000 (300,000*10) Additional paid in capital in excess of par preferred A/c Dr \$1,950,000 (5,850,000/3) To common stock A/c \$600,000 To Additional paid in capital in excess of par common A/c \$4,350,000 Dec 31, 2015 Preferred dividend A/c Dr \$180,000 (300,000*6%) To Payable dividend A/c \$180,000

#### Earn Coins

Coins can be redeemed for fabulous gifts.