Question

Equinox Outdoor Wear issues 1,000 shares of its $0.01 par value preferred stock for cash at $30 per share. Record the issuance of the preferred shares. (If no entry is required for a particular transaction/event, select "No Journal Entry Required" in the first account field.)

Answer 1

Answer:

The journal entry for the issuance of the preferred stock is shown below:

Explanation:

Cash A/c..................................................Dr   $30,000

    Preference Stock A/c....................................Cr $10

    Paid in Capital in excess of Par A/c...........Cr   $29,990

Working Note:

Cash = Shares × Issued price per share

where

Shares are 1,000

Issued Price per share is $30

= 1,000 × $30

= $30,000

Preference Stock = Shares × Par price

= 1,000 × $0.01

=$ 10

Paid in Capital in excess of Par = Cash - Preference stock

= $30,000 - $10

= $29,990