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.
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