New Wave Pool Corporation is authorized to issue common and $3 convertible preferred shares. Each preferred share is convertible into four common shares. On July 2, the company issued 100,000 preferred shares for $110 per share. The common shares were trading at $25 on September 7, $27.50 on September 19, and $29 on September 28.

Instructions

(a) On which date or dates would the preferred shareholders consider converting their shares to common? Why?

(b) Journalize the conversion of the preferred shares using the date chosen in part (a).

(c) Assume also that the preferred shares are redeemable at $115 per share at the option of the company. How, if at all, will this affect the preferred shareholders' decision to convert?