Question

Felix Incorporated has just exchanged 1,250 shares of $65 par-value preferred stock for a parcel of land advertised for a price of $90,000. If the current market value of the stock is $75 per share, how should Felix journalize this transaction?

Answer 1

Answer:

Dr Land account 90,000

Cr Preferred Stock account 81,250

Cr Paid-in Capital in Excess of Par Value - Preferred Stock account 8,750

Explanation:

When preferred stock is sold, the transaction must be recorded at par value in the preferred stock account. Any amount of money received over par value, must be recorded in the paid-in capital in excess of par value - preferred stock account.