Question

The Sneed Corporation issues 10,000 shares of $50 par preferred stock for cash at $75 per share. The entry to record the transaction will consist of a debit to Cash for $750,000 and a credit or credits to
a. Preferred Stock for $500,000 and Retained Earnings for $250,000.
b. Preferred Stock for $750,000.
c. Paid-in Capital from Preferred Stock for $750,000.
d. Preferred stock for $500,000 and Paid-in Capital in Excess of Par ValuePreferred Stock for $250,000.

Answer 1

Answer:

The answer is D.

Explanation:

Value of cash received is :

10,000 shares x $75

=$750,000

And that's a debit as it is shown in the question because cash was received.

Now the credit side.

Value of preferred stock is $50

So we have:

$50 x 10,000 shares

=$500,000 preferred shares.

Paid-in Capital in Excess of Par ValuePreferred Stock is $25 ($75 -$50)

So the value will be $25 x $10,000

=$250,000