Asked by Kristin Kowing on Jun 08, 2024
Verified
Taylor Corporation issues 20000 shares of $50 par value preferred stock for cash at $90 per share. The entry to record the transaction will consist of a debit to Cash for $1800000 and a credit or credits to
A) Preferred Stock for $1800000.
B) Preferred Stock for $1000000 and Paid-in Capital in Excess of Par-Preferred Stock for $800000.
C) Preferred Stock for $800000 and Paid-in Capital from Preferred Stock for $1000000.
D) Paid-in Capital from Preferred Stock for $1800000.
Par Value
The stated or principal value of a stock or bond as declared by the issuer.
Paid-In Capital
The amount of capital "paid in" by investors during common or preferred stock issuances, including the excess over par value.
Preferred Stock
A type of equity security that usually provides a fixed dividend prior to any dividend payments to common stockholders.
- Comprehend the foundational principles behind logging equity transactions and their effects on a company's financial reports.
- Understand the significance and effects of paid-in capital above par or stated value in equity transactions.
Verified Answer
RC
Robert ChuhanJun 12, 2024
Final Answer :
B
Explanation :
The preferred stock has a par value of $50, so 20000 shares at $50 each equals $1000000. The difference between the cash received of $90 per share and the par value of $50 per share is $40. Therefore, the entry will credit Preferred Stock for the par value of $1000000 and credit Paid-in Capital in Excess of Par-Preferred Stock for the remaining $800000 ($40 x 20000 = $800000).
Learning Objectives
- Comprehend the foundational principles behind logging equity transactions and their effects on a company's financial reports.
- Understand the significance and effects of paid-in capital above par or stated value in equity transactions.