A company issues 1.00 million shares of preferred stock with a par value of $2.0

Question

A company issues 1.00 million shares of preferred stock with a par value of $2.00 at its market price of $26.00 per share. The issuance should be recorded with a debit to Cash for:

A) $26.00 million, a credit to Preferred Stock for $2.00 million, and a credit to Additional Paid-in Capital for $24.00 million.

B) $26.00 million and a credit to Preferred Stock for $26.00 million.

C) $2.00 million and a credit to Preferred Stock for $2.00 million.

D) $24.00 million, a credit to Additional Paid-in Capital for $2.00 million, and a credit to Preferred Stock for $26.00 million.

A company issues 1.00 million shares of preferred stock with a par value of $2.00 at its market price of $26.00 per share. The issuance should be recorded with a debit to Cash for:

A) $26.00 million, a credit to Preferred Stock for $2.00 million, and a credit to Additional Paid-in Capital for $24.00 million.

B) $26.00 million and a credit to Preferred Stock for $26.00 million.

C) $2.00 million and a credit to Preferred Stock for $2.00 million.

D) $24.00 million, a credit to Additional Paid-in Capital for $2.00 million, and a credit to Preferred Stock for $26.00 million.

Explanation / Answer

The journal entry would be:

Cash a/c..Dr$26(1*26)

To preferred stock $2(1*2)

To Additional Paid-in Capital $24

Hence the correct option is A.

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