Question

In: Accounting

On January 1, 2020, Castaway Corp. issued 5,000 shares of preferred stock ($15 par value) at...

On January 1, 2020, Castaway Corp. issued 5,000 shares of preferred stock ($15 par value) at $45 per share. Each share of preferred stock is redeemable at the option of the stockholder at $45 per share. On September 1, 2020, preferred shareholders holding 1,000 shares of preferred stock redeemed their stock.

The entry recorded by Castaway Corp. on January 1, 2020, would not include the following:

A.

Credit to preferred stock at par value.

B.

Credit to additional paid-in capital for the excess of the issuance price over the par value.

C.

Debit to cash for the issuance price.

D.

Credit to a liability for the redemption feature.

Solutions

Expert Solution

On January 1, 2020, Castaway Corp. issued 5,000 shares of preferred stock ($15 par value) at $45 per share.

The following journal entry will be made to record the given transaction:

General Journal Debit Credit
Cash $225,000
Preferred stock $75,000
Additional paid in capital in excess of par- preferred $150,000

Par value of per share = $15

Issue price per share = $45

Number of shares issued = 5,000

Debit to cash = Number of shares issued x Issue price per share

= 5,000 x 45

= $225,000

Credit to preferred stock = Number of shares issued x Par value of per share

= 5,000 x 15

= $75,000

Credit to additional paid in capital in excess of par - preferred = Number of shares issued x (Issue price per share - Par value of per share )

= 5,000 x (45-15)

= 5,000 x 30

= $150,000

Hence, The entry recorded by Castaway Corp. on January 1, 2020, would not include the Credit to a liability for the redemption feature.

Correct option is D.


Related Solutions

On June 1, Summit Corporation issued 1,000 shares of $100 par value preferred stock at par...
On June 1, Summit Corporation issued 1,000 shares of $100 par value preferred stock at par value. On June 10, the corporation issued 3,000 shares of $10 par value common stock for $18 per share. On June 15, Summit issued 15,000 shares of common stock in exchange for land with a fair market value of $60,000 and a building with a fair market value of $180,000. Prepare journal entries for the above transactions.
Assume CGM Corp has issued and outstanding 22,000 shares of 5%, $25 par value preferred stock...
Assume CGM Corp has issued and outstanding 22,000 shares of 5%, $25 par value preferred stock and issued and outstanding 15,000 shares of $15 stated value common stock. The board of directors declares dividends of $100,000 on December 15, 2020, the preferred stock is cumulative, and dividends paid to the preferred stockholders has been as follows: 2017 - $13,750; 2018 - $13,750; and 2019 - $15,000. What amount is allocated to common stockholders?
January 1, 2020, Farhaan Corp. issued bonds with a par value of $ 1,000,000 at 98...
January 1, 2020, Farhaan Corp. issued bonds with a par value of $ 1,000,000 at 98 (which is net of issue costs), due in 15 years. Six years after the issue date, the entire issue is called at 102 and cancelled. Instructions Prepare the journal entry to reflect the reacquisition of the bond assuming the straight-line amortization method.
Refer to the following transactions: 1. Issued 540 shares of $80 par value preferred stock at...
Refer to the following transactions: 1. Issued 540 shares of $80 par value preferred stock at par. 2. Issued 640 shares of $80 par value preferred stock in exchange for land that had an appraised value of $81,600. 3. Issued 19,000 shares of $4 par value common stock for $10 per share. 4. Purchased 4,750 shares of common stock for the treasury at $10 per share. 5. Sold 1,900 shares of the treasury stock purchased in transaction d for $12...
A corporation issued 20,000 shares of $5 par value 6% preferred stock, and 10,000 shares of...
A corporation issued 20,000 shares of $5 par value 6% preferred stock, and 10,000 shares of $10 par value common stock, when the corporation was formed two years ago. No dividend was declared or paid last year. This year the corporation has $50,000 available for dividends. How much should each share of common stock receive? $3.80 $2.80 $4.40 zero The statement of cash flows helps address questions such as How is the increase in investments financed? How much cash is...
On January 1, Novak Corp. had 99,000 shares of no-par common stock issued and outstanding. The...
On January 1, Novak Corp. had 99,000 shares of no-par common stock issued and outstanding. The stock has a stated value of $4 per share. During the year, the following occurred. Apr. 1 Issued 25,500 additional shares of common stock for $17 per share. June 15 Declared a cash dividend of $1 per share to stockholders of record on June 30. July 10 Paid the $1 cash dividend. Dec. 1 Issued 3,000 additional shares of common stock for $19 per...
1. A company issued 5,000 shares of its $2 par value common stock for $25 per...
1. A company issued 5,000 shares of its $2 par value common stock for $25 per share on 9-1-17. The entry to record this transaction is a) Debit to ,,,,,,,,,,,,,,,,, for $,,,,,,,,,,,,,,, b) Credit to ,,,,,,,,,,,,,,,,, for $ ,,,,,,,,,,,,, c) Credit to ,,,,,,,,,,,,,,,,,, for $,,,,,,,,, 2. A company has total paid in capital from common stock of $1,500,000 and total paid in capital from preferred stock of $350,000. It has retained earnings of $275,000 and there is treasury stock of...
Rosewell Company has had 5,000 shares of 9%, $100 par-value preferred stock and 10,000 shares of...
Rosewell Company has had 5,000 shares of 9%, $100 par-value preferred stock and 10,000 shares of $10 par-value common stock outstanding for the last two years. During the most recent year, dividends paid totaled $65,000; in the prior year, dividends paid totaled $40,000. Required: Compute the amount of dividends that must have been paid to preferred stockholders and common stockholders in each year, given the following independent assumptions: e. Preferred stock is fully participating and cumulative. f. Preferred stock is...
On July 1, Hanson Corporation issued 10 shares of $100 par value preferred stock for cash...
On July 1, Hanson Corporation issued 10 shares of $100 par value preferred stock for cash of $1,000 per share. Complete the necessary journal entry by selecting the account names from the drop-down menus and entering the dollar amounts in the debit or credit columns. On July 1, Hanson Corporation issued 10 shares of $100 par value preferred stock for cash of $1,000 per share.
Preferred Stock- 5% $11 Par Value 5,500 shares authorized 4,000 shares issued and outstanding Common Stock...
Preferred Stock- 5% $11 Par Value 5,500 shares authorized 4,000 shares issued and outstanding Common Stock - $.20 Par Value 2,000,000 shares authorized, 1,650,000 shares issued and outstanding Requirement 1. Sapphire declares cash dividends of $28,000 for 2018. How much of the dividends goes to preferred? stockholders? How much goes to common? stockholders? ?(Complete all input boxes. Enter? "0" for any zero? amounts.) Sapphire dividend would be divided between preferred and common stockholders in this? manner: Total Dividend Dividend to...
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT