3. During the year, Salem, Inc. had several stockholders equity transactions, which are summarized in the following table. Preferred stock has a par value of $75 and is convertible into common stock at the ratio of 1:1. The common stock has a par value of $5.

	Convertible Redeemable Preferred Stock	Common Stock	Additional Paid-In Capital	Retained Earnings	Total
Balance 12/31/16	$925,000	$450,000	$ 97,000	$338,000	$1,810,000
Net Income				78,000	78,000
Sale of common stock		125,000	487,500		612,500
Conversion of redeemable preferred stock	(112,500)	7,500	105,000		0
Balance 12/31/17	$812,500	$582,500	$689,500	$416,000	$2,500,500

Required 20pts (4pts c/u)

1. How many shares of common stock did Salem sell during the year and at what price per share?

2. How many shares of preferred stock were converted during the year?

3. Why would a company such as Salem offer a conversion feature on preferred stock?

4. Why would a shareholder exercise the conversion privilege?

5. What dividends did Salem pay during the year?