Question - Cando Corporation is authorized to issue 10,000 shares of $100 par, convertible, callable preferred stock and 100,000 shares of no-par, $1 stated-value common stock. There are currently 7,000 shares of preferred and 30,000 shares of common stock outstanding. The following are several alternative transactions:
1. Purchased land by issuing 640 shares of preferred stock and 1,000 shares of common stock. Preferred and common are currently selling at $113 and $36 per share, respectively. No reliable appraisal of the land is available.
2. Same as Transaction 1, except that land is appraised at $104,000, and the preferred stock has no current market value.
3. Issued, for $99,000 cash, a combination of 400 shares of preferred stock and bonds payable with a face value of $50,000. Currently, the preferred stock is selling for $120 per share and the bonds at 104.
4. Same as Transaction 3, except that the bonds do not have a current market value.
5. Same as Transaction 3, except that the preferred stock does not have a current market value.
6. Preferred shareholders (who had originally paid the corporation $110 per share for their stock) convert 6,500 preferred shares into 19,500 shares of common stock. The current market prices of the preferred stock and the common stock are $120 and $41 per share, respectively.
7. The corporation calls the 7,000 shares of preferred stock (originally issued at $110 per share) at $120 per share.
Required: Prepare the journal entry necessary to record each transaction. Below each entry, show your computations and logic.