Trevor had outstanding 40,000 shares of $30 par convertible preferred stock that had been sold at $50 a share. One-fourth of these shares were converted into common stock at the stated ratio of four shares of $5 par common stock (now selling at $15 a share) for each share of preferred stock.

Required:

a. Record the conversion of preferred into common stock.

b. Use the same information as in requirement (a) except assume that each share of preferred stock is convertible into two shares of $35 par common stock (now selling at $40 a share). Record this conversion of preferred into common stock.

c.Why did Trevor not have common stock converted into preferred stock?