Based on the Following Information, Determine How Many Shares of Common

question 116

Essay

Based on the following information, determine how many shares of common stock would be outstanding if all conversion features were exercised.
$\begin{array}{lr}\text { Convertible Bonds Payable } & \$80,000 \\\text { Convertible Preferred Stock - par } & 50,000 \\\text { Common Stock - par } & 2,000,000 \\\text { Additional Paid-in Capital } & 1,800,000 \\\text { Retained Earnings } & 3,000,000 \\\text { Shares held in Treasury } & (600,000)\end{array}$

Additional information:

a. Common stock was issued when the market price was $10 per share
b. The treasury stock was acquired when the market value per share was $15.
c. Current fair market value of the common stock is $18 per share.
d. Each share of $1,000 par value preferred stock is convertible to 50 shares of common stock.
e. Each $1,000 face value bond can be converted to 40 shares of common stock. The bonds were issued at par.

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Definitions:

Cyclical Theory

Cyclical theory is the idea that certain phenomena or events recur in cycles, often used in the context of economic, social, or historical patterns.

Changing Seasons

The transition periods between the main climatic seasons (spring, summer, autumn, and winter), affecting weather patterns, ecosystems, and human activities.

Ebb and Flow

A metaphorical description of the continual fluctuation or cyclic patterns of change, resembling the movement of tides.

Differentiation

The process by which a society or social system becomes more complex by creating specialized roles and institutions.