In Its First Year of Operations, Snake Corporation Had the Following

question 186

Essay

In its first year of operations, Snake Corporation had the following transactions relating to its convertible preferred shares and common shares. The preferred dividend rate is $ 2 per share.
Jan 1 Issued 10,000 common shares at $ 10 per share.
Feb 1 Issued 3,000 preferred shares for $ 41 per share.
Jul 1 Declared and paid annual preferred dividends.
Nov 1 Converted 1,000 preferred shares to common shares when the market value of the preferred shares was $ 42 and the market value of the common shares was $ 20. One share of preferred is convertible to 10 common shares.
Instructions
a) Journalize the transactions.
b) Indicate the amount to be reported for (1) preferred shares and (2) common shares at the end of the year.

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Definitions:

Securities

Financial instruments representing ownership (stocks), a debt agreement (bonds), or rights to ownership (derivatives) that can be bought and sold in financial markets.

Equipment

Physical assets used in the operation of a business, including machinery, tools, and vehicles.

Floating-Rate Bonds

Bonds whose interest payments fluctuate with market interest rates.

Coupon Rate

The annual interest rate paid on a bond, expressed as a percentage of the bond's face value.