On January 2, 2016, Bray Corporation issues 900 shares of $100 par convertible preferred stock for $117 per share. On January 7, 2017, all the preferred shareholders convert their shares to common stock. Required: 1. Prepare the January 2, 2016, journal entry to record the issuance of the preferred stock. 2. Prepare the January 7, 2017, journal entry to record the conversion, assuming the preferred stock contract states that: a. each share of preferred stock is convertible into 7 shares of $10 par common stock b. each share of preferred stock is convertible into 12 shares of $10 par common stock

See Explanation

Explanation:

1. Prepare the January 2, 2016, journal entry to record the issuance of the preferred stock.

The following entries are needed..

1. Cash

Preferred Stock

Additional Paid-in capital for preferred stock

The entries are calculated as follows

Cash = 900 * $117 = $105,300

Preferred Stock = $100 par * 900 = $90,000

Additional Paid-in capital for preferred stock =$105,300 - $90,000 = $15,300

The entries are as follows

Cash $105,300

Preferred Stock $90,000

Additional Paid-in capital for preferred stock $15,300

2a.

The entries are as follows

Preferred Stock

Additional Paid-in capital on preferred stock

Common stock

Additional Paid-in capital on preferred stock conversion

The entries are calculated as follows;

Preferred Stock = $100 par * 900 = $90,000

Additional Paid-in capital for preferred stock =$105,300 - $90,000 = $15,300

Common Stock = $7 par * 900 * 10 = $63,000

Additional Paid-in capital on preferred stock conversion =$105,300 - $63,000 = $42,300

The entries are as follows

Preferred Stock $90,000

Additional Paid-in capital for preferred stock $15,300

Common Stock $63,000

Additional Paid-in capital on preferred stock conversion $42,300

b.

The entries are as follows

Preferred Stock

Additional Paid-in capital on preferred stock

Retained Earnings

Common stock

The entries are calculated as follows;

Preferred Stock = $100 par * 900 = $90,000

Additional Paid-in capital for preferred stock =$105,300 - $90,000 = $15,300

Common Stock = $12 par * 900 * 10 = $108,000

Retained Earnings =$108,000 - $90,000 - $15,300 = $2,700

The entries are as follows

Preferred Stock $90,000

Additional Paid-in capital for preferred stock $15,300

Retained Earnings = $2,700

Common Stock $108,000

was my answer wrong?