Reference no: EM132538114

How to convert convertible preferred stock to a common stock?

Eg. The company was authorized to issue 60,000 shares of P10 par value common stock and 120,000 shares of 10%, P100 par value convertible preferred stock.

In connection with the company's financial statements, the auditor noted the following transactions involving stockholders' equity during 2019:

1. Jan 1 Issued 1,500 shares of common stock to the corporation promoters in exchange for property valued at P510,000 and services valued at P210,000. The property costs P270,000 3 years ago and was carried on the promoter's books at P150,000
2. Jan 31 Issued 30,000 shares of convertible preferred stocks at P150 per share. Each share can be converted to five shares of common stock. The corporation paid P225,000 to an agent for selling the shares.
3. Feb 15 Sold 9,000 shares of common stock at P390 per share. The corporation paid issue costs of P75,000.
4. May30 Received subscriptions for 12,000 shares of common stock at P450 per share.
5. Aug30 Issued 2,100 shares of common stock and 4,200 shares of preferred stock in exchanged for a building with a fair market value of P1,530,000. The building was originally purchased for P1,140,000 by the investors and has a book value of P660,000. In addition, 1,800 shares of common stock were sold for P720,000 cash.
6. Nov15 Payments in full for half of the subscription and partial payments or the rest of the subscription were received. Total cash received was P4,200,000. Shares of stocks were issued for the fully paid subscriptions.
7. Dec1 Declared a cash dividend of P10 per share on preferred stock, payable on December 31 to stockholders of record on December 15, and P20 per share cash dividend on common stock, payable on January 15, 2020 to stockholders of record on December 15.
8. Dec31 Paid the preferred stock dividend.

Net income for the first year of operations was P1,800,000.