Assume that the preferred shares are convertible into common at

Assume that the preferred shares are convertible into common at a rate of eight common shares for each share of preferred. If 1,000 shares of the preferred are converted into common shares on December 1, 2020, prepare the entry and describe how this affects the equity section of the balance sheet (immediately after the conversion).

                                             Jager Metal Corp.
                                Equity Section of the Balance Sheet
 
                                           November 30, 2020

Contributed capital:
Preferred shares, $13.20 cumulative,
2,000 shares authorized and issued ................................................ $ 480,000
Common shares, unlimited shares authorized;
60,000 shares issued ........................................................................... 1,440,000
Total contributed capital ................................................................... $1,920,000
Retained earnings ................................................................................. 1,008,000
Total equity ......................................................................................... $2,928,000


Analysis Component: If you are a common shareholder in this company, and it plans to pay total cash dividends of $584,400, does it make a difference to you whether the conversion takes place before the dividend declaration? Why?

Balance Sheet
Balance sheet is a statement of the financial position of a business that list all the assets, liabilities, and owner’s equity and shareholder’s equity at a particular point of time. A balance sheet is also called as a “statement of financial...
Dividend
A dividend is a distribution of a portion of company’s earnings, decided and managed by the company’s board of directors, and paid to the shareholders. Dividends are given on the shares. It is a token reward paid to the shareholders for their...


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