Fire Red Company is authorized to issue 20,000 shares of 8%, $100 par value pref

Question

Fire Red Company is authorized to issue 20,000 shares of 8%, $100 par value preferred stock and 1,000,000 shares of no-par common stock with a stated value of $1 per share. If Fire Red issues 10,000 shares of preferred stock for land with an asking price of $1,020,000 and a market value of $1,080,000, which of the following would be the journal entry for Fire Red to record?

a.      Land                                                                        1,000,000

                 Preferred Stock                                              1,000,000

b.      Land                                                                        1,080,000

                 Preferred Stock                                              1,080,000

c.      Land                                                                        1,200,000

                 Preferred Stock                                              1,000,000

                 Paid-in Capital in Excess of Par-Preferred                          200,000

d.      Land                                                                        1,080,000

                 Preferred Stock                                              1,000,000

                 Paid-in Capital Excess of Par-Preferred           80,000

Explanation / Answer

DATE DESCRIPTION POST REF. DEBIT CREDIT Land $1,080,000.00 To Preferred Stock $1,000,000.00 Paid-in Capital in Excess of Par-Preferred $80,000.00

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