In IDA 5.0 Freeware how do you convert a block of data into a unicode string, the only thing I can find is to convert it into an ascii string.
db 'a' db 0 db 'b' db 0 db 'c' db 0 db 'd' db 0 db 0 db 0
unicode <abcd>, 0
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Press Alt-A to bring up the "string style" dialog, from which you can create a string of various types (including Unicode). Through this dialog, you can optionally set the default string type that is created when you press a (i.e., you can make it such that Unicode is the default if you want).
Alternatively use Alt+A U as pointed out by joxeankoret in the comment.