Conversion of Preferred Stock into Common Stock

Los Altos, Inc., has 12,000 shares of $100 par value, 6% preferred stock and 80,000 shares of $0.50 par value common stock outstanding. The preferred stock is convertible into the companys common stock at a conversion rate of 1-to-20; that is, each share of preferred stock is convertible into 20 shares of common stock. The preferred stock had been sold for its par value when issued. Determine the financial statement effects of the conversion of all of the companys preferred stock into common stock.

Balance Sheet
Assets	=	Liabilities	+	Equity
				Preferred stock	+	Common Stock	+	Paid-in Capital in Excess of Par Value	+	Retained Earnings
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