Chapter 15, Problem 3P

To determine

Stock: Common stock represents equity ownership in a corporation. Common stockholders bear a higher amount of risk of loss and are also entitled to higher benefits in the company’s profits and assets. Common stock can be issued at par or at premium or discount.

A preferred stock is a special class of stock that possesses certain preference over the noncommon stock, e.g., preference as to payment of dividends or as to assets in the event of liquidation of a company. Preferred stock can be issued at par or at premium or discount. Preferred stock is reported at par values in the stockholders’ equity section of the balance sheet. Any excess over the par value is reported as part of paid-in capital.

To prepare: To prepare the equity section of the balance sheet.