On January 2, 2016, Bray Corporation issues 900 shares of $100 par convertible preferred stock for $117 per share. On January 7, 2017, all the preferred shareholders convert their shares to common stock.

Required:

1.	Prepare the January 2, 2016, journal entry to record the issuance of the preferred stock.
2.	Prepare the January 7, 2017, journal entry to record the conversion, assuming the preferred stock contract states that:
a.	each share of preferred stock is convertible into 7 shares of $10 par common stock
b.	each share of preferred stock is convertible into 12 shares of $10 par common stock

CHART OF ACCOUNTS

Bray Corporation

General Ledger

	ASSETS
111	Cash
121	Accounts Receivable
141	Inventory
152	Prepaid Insurance
181	Equipment
198	Accumulated Depreciation

	LIABILITIES
211	Accounts Payable
231	Salaries Payable
250	Unearned Revenue
261	Income Taxes Payable

	EQUITY
305	Preferred Stock
311	Common Stock
318	Additional Paid-in Capital on Preferred Stock
319	Additional Paid-in Capital from Preferred Stock Conversion
320	Additional Paid-in Capital on Common Stock
331	Retained Earnings

	REVENUE
411	Sales Revenue

	EXPENSES
500	Cost of Goods Sold
511	Insurance Expense
512	Utilities Expense
521	Salaries Expense
532	Bad Debt Expense
540	Interest Expense
541	Depreciation Expense
559	Miscellaneous Expenses
910	Income Tax Expense

Prepare the January 2, 2016, journal entry to record the issuance of the preferred stock.

PAGE 1

GENERAL JOURNAL

	DATE	ACCOUNT TITLE	POST. REF.	DEBIT	CREDIT
1
2
3

Prepare the January 7, 2017, journal entry to record the conversion, assuming the preferred stock contract states that: Additional Instruction

a.	each share of preferred stock is convertible into 7 shares of $10 par common stock
b.	each share of preferred stock is convertible into 12 shares of $10 par common stock

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GENERAL JOURNAL

	DATE	ACCOUNT TITLE	POST. REF.	DEBIT	CREDIT
1
2
3
4