In: Accounting
Penland Corporation is authorized to issue both preferred and common stock. The par value of the preferred is $50. During the first year of operations, the company had the following events and transactions pertaining to its preferred stock.
Feb. 1 | Issued 40,000 shares for cash at $51 per share. |
July 1 | Issued 60,000 shares for cash at $56 per share. |
Instructions
(a) Journalize the transactions.
(b) Post to the stockholders' equity accounts. (Use T‐accounts.)
(c) Discuss the statement presentation of the accounts.
Solution a:
Journal Entries - Penland Corporation | |||
Date | Particulars | Debit | Credit |
1-Feb | Cash Dr | $2,040,000.00 | |
To Preferred stock | $2,000,000.00 | ||
To Paid in capital in excess of par - Preferred stock | $40,000.00 | ||
(To record issue of preferred stock) | |||
1-Jul | Cash Dr | $3,360,000.00 | |
To Preferred stock | $3,000,000.00 | ||
To Paid in capital in excess of par - Preferred stock | $360,000.00 | ||
(To record issue of preferred stock) |
Solution b:
Preferred Stock | |||
Date | Debit | Date | Credit |
1-Feb | $2,000,000.00 | ||
1-Jul | $3,000,000.00 |
Paid in capital in excess of par - Preferred stock | |||
Date | Debit | Date | Credit |
1-Feb | $40,000.00 | ||
1-Jul | $360,000.00 |
Solution c:
Preferred stock would be a part of the Stockholders' Equity section in balance sheet and will be reported along with common stock, retained earnings, and treasury stock. Presentation would be as follows:
Preferred stock, $50 par value, 100000 issued and outstanding -
5000000
Paid in capital in excess of par - Preferred stock - 400000