a company sells 1million shares of common stock with a par value of $0.03 for $1

Question

a company sells 1million shares of common stock with a par value of $0.03 for $15.10 a share. To record the ransaction, the company would: O debit Cash far $30,000, deblt Capital Recelvable for $15,070,000, credit Common Stock for $30,000 and credt Adaional Pald-In Capital for $15,070,000 O debit Cosh for $15.10 milion and credit Common Stock for $15.10 million O debit Cash for $15.10 million, credit Common Stodk for $30,000 and credit Additional Paid-in Captal for O debit Cosh for $30,000 and credit Common Stock for $30.000 $15.070.000 A company issues 113,000 shares of preferred stock for $39 a share. The stock has a fixed annual divdend rate of 8% and a par value of $10 per share. Preferred stockholders can antapte receving a dildend of. O $90.400 each yeer 8% of the market value of the stock at the time the dividend is declared S352.560 each year 0 8% of net income each year.

Explanation / Answer

a)

Total cash received from sale of shares = Number of shares* Issue price per share

= 1000000*15.10 = 15100000

Common stock = 1000000*0.03 = 30000

Additional paid in capital = 15100000 - 30000 = 15070000

Journal:

Cash Dr 15100000

Common stock Cr 30000

Additional paid in capital Cr 15070000

Answer is option c.

b)

Number of preferred stock = 113000

Par value = 10

Fixed annual dividend rate = 8%

Anticipated dividend to preferred stockholders = 113000*10*8% = 90400

Answer is option a.

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