[Anonymous]

When converting convertible bonds we use the book value method –the common stock gets recorded at the CV of the bonds…

SO, if we exercise convertible preferred stock, do we record the common stock at the CV of the preferred stock (like w/convertible bonds) or at the common stock’s FMV?

Thanks for the help, Wiley has left me unsure.

[momto5]

Becker doesn't really address this either, other than to say that “convertible preferred stock may be exchanged for common stock at the option of the stockholder at a specified conversion rate.” So I would assume that the specified rate would give you an exact amount which you would then book at common stock par value with the excess going to APIC. But seeing as neither review course really covered this, it is probably not something needed to know. More important to know how convertible preferred stock affects EPS calculations.

FAR - 92 (4/27/12)
AUD - 96 (7/17/12)
BEC - 92 (8/30/12)
REG - 91 (11/12/12)

[Author]

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