Explanation Preferred stock: The stock that provides a fixed amount of return (dividend) to its stockholder before paying dividends to common stockholders is referred as preferred stock. Common stock: These are the ordinary shares that a corporation issues to the investors in order to raise funds. In return, the investors receive a share of profit from the profits earned by the corporation in the form of dividend. a. Prepare journal entry to record the issuance of common stock for $35 per share . Date Account Titles and Explanation Debit (Amount in $) Credit (Amount in $) Cash (2) 35,000 Common stock (1) 15,000 Paid-in capital in excess of par-common (3) 20,000 (To record issuance of common stock) (Table 1) Cash is an asset and there is an increase in the value of an asset. Hence, debit the cash by $35,000. Common stock is a component of stockholder’s equity and there is an increase in the value of equity. Hence, credit the common stock by $15,000. Paid-in capital in excess of par- common stock is a component of stockholder’s equity and there is an increase in the value of equity. Hence, credit the paid-in capital in excess of par-common by $20,000. Working Notes: Calculate the value of common stock: Common stock = Number of shares × Par value per share =1,000 shares × $15 =$15,000 (1) Calculate the amount of cash received: Cash received = Number of shares × Issue price per share =1,000 shares × $35 =$35,000 (2) Calculate the value of additional paid in capital: Paid-in capital in excess of par value= ( Total cash received (2) − Common stock value (1) ) = $ 35 , 000 − $ 15 , 000 = $ 20 , 000 (3) b

Financial Accounting, Student Value Edition (5th Edition)

5th Edition

ISBN: 9780134728520

Author: Robert Kemp, Jeffrey Waybright

Publisher: PEARSON

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Chapter 10, Problem 6SE

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Prepare journal entry to record the issuance of common stock and preferred stock.

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Chapter 10 Solutions

Financial Accounting, Student Value Edition (5th Edition)

Ch. 10 - What are the four baste rights of stockholders?Ch. 10 - Assume you are a CFO of a company that is...Ch. 10 - Prob. 3DQ Ch. 10 - What accounts, if any, are involved in the journal...Ch. 10 - With which type of stock would dividends in...Ch. 10 - What accounts are affected by the declaration and...Ch. 10 - What are some of the reasons for issuing a stock...Ch. 10 - Prob. 8DQ Ch. 10 - What could you reasonably conclude if a company...Ch. 10 - Prob. 10DQ

Ch. 10 - Prob. 1SC Ch. 10 - Prob. 2SC Ch. 10 - Prob. 3SC Ch. 10 - Prob. 4SC Ch. 10 - Prob. 5SC Ch. 10 - Prob. 6SC Ch. 10 - Prob. 7SC Ch. 10 - Prob. 8SC Ch. 10 - Prob. 9SC Ch. 10 - Prob. 10SC Ch. 10 - Prob. 11SC Ch. 10 - Prob. 12SC Ch. 10 - Stockholders' equity terminology (Learning...Ch. 10 - Stock issuance (Learning Objective 3) 5-10 min....Ch. 10 - Issuance of stock for cash and noncash assets...Ch. 10 - Prob. 4SE Ch. 10 - Prob. 5SE Ch. 10 - Prob. 6SE Ch. 10 - Prob. 7SE Ch. 10 - Accounting for cash dividends (Learning Objective...Ch. 10 - Prob. 9SE Ch. 10 - Prob. 10SE Ch. 10 - Prob. 11SE Ch. 10 - Prob. 12SE Ch. 10 - Prob. 13SE Ch. 10 - Prob. 14SE Ch. 10 - Prob. 15AE Ch. 10 - Issuing stock (Learning Objectives 3 7) 10-15 min....Ch. 10 - Prob. 17AE Ch. 10 - Prob. 18AE Ch. 10 - Prob. 19AE Ch. 10 - Accounting for cash dividends (Learning Objective...Ch. 10 - Prob. 21AE Ch. 10 - Accounting for cash and stock dividends (Learning...Ch. 10 - Prob. 23AE Ch. 10 - Prob. 24AE Ch. 10 - Prob. 25AE Ch. 10 - Accounting for treasury stock (Learning Objectives...Ch. 10 - Prob. 27AE Ch. 10 - Prob. 28AE Ch. 10 - Prob. 29AE Ch. 10 - Calculating return on equity (Learning Objective...Ch. 10 - Prob. 31BE Ch. 10 - Prob. 32BE Ch. 10 - Prob. 33BE Ch. 10 - Prob. 34BE Ch. 10 - Prob. 35BE Ch. 10 - Prob. 36BE Ch. 10 - Accounting for stock dividends (Learning...Ch. 10 - Accounting for cash and stock dividends (Learning...Ch. 10 - Prob. 39BE Ch. 10 - Prob. 40BE Ch. 10 - Accounting for treasury stock (Learning Objectives...Ch. 10 - Prob. 42BE Ch. 10 - Disclosing stockholders equity on a balance sheet...Ch. 10 - Accounting for various stockholders' equity...Ch. 10 - Prob. 45BE Ch. 10 - Prob. 46BE Ch. 10 - Prob. 47AP Ch. 10 - Analyzing stockholders equity (Learning Objectives...Ch. 10 - Analyzing stockholders equity (Learning Objectives...Ch. 10 - Accounting for cash dividends (Learning Objective...Ch. 10 - Accounting for various stockholders equity...Ch. 10 - Prob. 52AP Ch. 10 - Prob. 53AP Ch. 10 - Prob. 54BP Ch. 10 - Prob. 55BP Ch. 10 - Analyzing stockholders equity (Learning Objectives...Ch. 10 - Accounting for cash dividends (Learning Objective...Ch. 10 - Prob. 58BP Ch. 10 - Prob. 59BP Ch. 10 - Prob. 60BP Ch. 10 - Prob. 1CE Ch. 10 - Continuing Problem This problem continues our...Ch. 10 - Prob. 1EIA Ch. 10 - Case 2. The board of directors for Atlantic...Ch. 10 - Financial Analysis Purpose: To help familiarize...Ch. 10 - Prob. 1IA Ch. 10 - Prob. 1SBA Ch. 10 - Written Communication You just got off the...

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Prepare journal entry to record the issuance of common stock and preferred stock .

Solution Summary: The author explains the difference between common stock and preferred stock. Preferred stock provides a fixed amount of return (dividend) to its stockholder.

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