When Recording the Conversion of Preferred Stock into Common Stock

question 96

Multiple Choice

When recording the conversion of preferred stock into common stock, if the total contributed capital eliminated in regard to the preferred stock is less than the common stock par value, the difference is debited to

• A)Additional Paid-in Capital on Preferred Stock
• B)Additional Paid-in Capital on Common Stock
• C)Common Stock
• D)Retained Earnings

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Definitions:

Asset Turnover

A measure of how efficiently a company uses its assets to generate sales; computed by dividing net sales by average total assets.

Price-earnings Ratio

A valuation metric for stocks, calculated by dividing the market price per share by the earnings per share.

Dividends

Payments made by a corporation to its shareholder members, usually derived from the company's profits.

Net Income

The profit of a company after all expenses, taxes, and costs have been deducted from total revenue.