If Convertible Preferred Shares Are Converted into Common Shares

question 33

Multiple Choice

If convertible preferred shares are converted into common shares,

• A) a gain on conversion must be recorded if the legal capital of the preferred shares is greater than the legal capital of the common shares.
• B) a loss on conversion must be recorded if the legal capital of the preferred shares is less than the legal capital of the common shares.
• C) a gain or loss on conversion is not recognized or recorded.
• D) the fair value of the preferred shares on the date of conversion is credited to the Common Shares account.

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