During year 1, Brad Co. issued 5,000 shares of $100 par
convertible preferred stock for $110 per share. One share of
preferred stock can be converted into three shares of Brad?s $25
par common stock at the option of the preferred shareholder.
On December 31, year 3, when the market value of the common
stock was $40 per share, all of the preferred stock was converted.
What amount should Brad credit to Common Stock and to Additional
Paid-in Capital?Common Stock as a result of the conversion?

Common stock
Additional paid-in capital

$375,000 $175,000
$375,000 $225,000
$500,000 $ 50,000
$600,000 $0

Answer rating: 100% (QA)

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