Answer:
Cash $5,937,500
To Common stock (125,000 shares × $0.01) $1,250
To Additional paid in capital in excess of par value - Common stock (125,000 shares × $12.49) $1,561,250
To Preferred stock (125,000 shares × $30) $3,750,000
To Additional paid in capital in excess of par value - Preferred stock (125,000 shares × $5) $625,000
(Being the issuance of the common stock and the preferred stock is recorded)
Explanation:
The journal entry is shown below:
Cash $5,937,500
To Common stock (125,000 shares × $0.01) $1,250
To Additional paid in capital in excess of par value - Common stock (125,000 shares × $12.49) $1,561,250
To Preferred stock (125,000 shares × $30) $3,750,000
To Additional paid in capital in excess of par value - Preferred stock (125,000 shares × $5) $625,000
(Being the issuance of the common stock and the preferred stock is recorded)
For recording this we debited the cash as it increased the assets and the equity is also credited so the preferred stock and the common stock could be credited along with the additional paid in capital in excess of par
