Chapter 15, Problem 7BE

To determine

Issue of preference shares: A preferred stock is a special class of stock that possesses certain preference over the non common stock, e.g., preference as to the 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 value in the stockholders’ equity section of the balance sheet. Any excess over the par value is reported as a part of the paid-in capital.

To prepare: To prepare the journal entry for issue of preference stock.

Given information: Number of shares issued: 500.

Par value: $100.

Issue price: $61,500.