$|11\mathrm{.}15$ Accounting for Shareholders' Equity Transactions. The shareholders' equity section of the consolidated balance sheet of Kona Corporation appeared as follows at the beginning of the year.

The following transactions occurred during the year:

$1.$ Generated net income of $\backslash (\backslash$$ $120,000\backslash ).$

$2.$ Paid cash dividends of $\backslash (\backslash$$ $220,000\backslash ).$

$3.$ Issued a ten percent common stock dividend; the fair value of the stock was $\backslash (\backslash$$ $10\backslash )$ per share at this time.

$4.$ Declared and issued a $2-$for$-$l forward stock split.

$5.$ Converted $10,000$ shares of convertible preferred stock with a book value of $\backslash (\backslash$$ $300,000\backslash )$ into $30,000$ shares of common stock.

Prepare the shareholders' equity section of the balance sheet of Kona Corporation at yearend. How is the capital market likely to react to the conversion of convertible preferred stock into common stock? Why?