003 Preferred Stock

Question 1

What is the accounting treatment for the retirement of preferred stock?

Answer 1

1 All related Owner’s Equity accounts are removed; 2 Debit differences go to retained earnings; 3 Credit differences go to contributed capital.

Question 2

What is the accounting treatment for the conversion of preferred stock?

Answer 2

1 Preferred stock accounts are transferred to common stock accounts; 2 If total preferred stock value is less than common stock par value, debit retained earnings.

Question 3

For what amount is Preferred Stock Additional Paid in Capital debited when called or redeemed?

Answer 3

Amount recorded from original issuance.

Question 4

Under what condition is retained earnings debited on conversion of preferred stock to common stock?

Answer 4

Total recorded value of preferred is less than par value of common on conversion.