The shareholders’ equity section of the consolidated balance sheet of Perry Corporation appeared as follows at the beginning of the year.

The following transactions occurred during the year:
1. Generated net income of \($80,000\).
2. Paid cash dividends of \($220,000\).
3. Issued a ten percent common stock dividend; the fair value of the stock was \($10\) per share at this time.
4. Declared and issued a 2-for-1 forward stock split.
5. Converted 10,000 shares of convertible preferred stock with a book value of \($300,000\) into 30,000 shares of common stock.
Prepare the shareholders’ equity section of the balance sheet of Perry Corporation at year-end. How is the capital market likely to react to the conversion of convertible preferred stock into common stock? Why?

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Common stock, $1.00 par value Additional paid-in-capital... Convertible preferred stock, no par value Retained deficit Treasury stock " Shareholders' equity 100,000 1,200,000 800,000 (600,000) (250,000) $1,250,000