On January 2, 2010, the Bray Corporation issues 900 shares of $100 par convertible preferred stock for $117 per share. On January 7, 2011, all the preferred stockholders convert their shares to common stock.
Required:
1. Prepare the January 2, 2010 journal entry to record the issuance of the preferred stock.
2. Prepare the January 7, 2011 journal entry to record the conversion, assuming the preferred stock contract states that
a. Each share of preferred stock is convertible into seven shares of $10 par common stock.
b. Each share of preferred stock is convertible into twelve shares of $10 par common stock.