In its first year of operations. Sonny and Shares Corp. had the following transactions pertaining to its convertible preferred shares and common shares. The preferred dividend rate is $2 per share. 1 Issued 10.000 common shares at S10 per share Feb. 1 Issued 3,000 preferred shares for cash at $41 per share. July 1 Declared annual preferred dividends. Nov Jan. Converted 1.000 preferred shares to common shares when the market value of the preferred shares was $42 and the market value of the common shares was $20. One share of preferred is convertible to 10 common shares. 1

The transaction analysis is done with the help of the accounting equation. The basic accounting equation is alternatively known as the balance sheet equation is based on the double-entry system which says that for each transaction happening in a business…