converting redeemable preference units at maturity to ordinary units

Ron Martin

• 11 February 2025 10:49

I have 875,000 of redeemable preference $1 units which have reached the maturity date upon which they convert to ordinary units.

What is the journal entry that is needed to effect this change with no change in ownership; no funds or consideration involved; just an increase in the number of ordinary units held?  

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  Christopher Banks

  • 20 February 2025 00:51

  Hi Ron,

  Assuming the Ordinary and Preference shares are recorded under different accounts, I recommend processing a journal with the buy of the ordinary shares against the sale of the Preference shares, at cost base so there are no capital gains or losses. Example;

  Dr Ord 875,000 units debit $875,000 
        Cr Pref 875,000 units credit $875,000

  I hope the above answers your post and if there are any further questions please reply to let me know so I may assist further.

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