Question

Sylvan Heights Company issues 106,000 shares of preferred stock for $46 per share. The stock has...

Sylvan Heights Company issues 106,000 shares of preferred stock for $46 per share. The stock has a fixed dividend rate of 6% and a par value of $9 per share. The company records the issuance with a debit to Cash for: _______Explain.

A) $4.88 million, a credit to Preferred Stock for $954,000, and a credit to Additional Paid-in Capital for 3.92 million.

B) $4.88 million and a credit to Preferred Stock for $4.88 million

Homework Answers

Answer #1

The answer would be “(A) $4.88 million, a credit to Preferred Stock for $954,000, and a credit to Additional Paid-in Capital for 3.92 million”.

The journal entry to record the issue of Preferred stock is as follows

Account Titles and Explanation

Debit

Credit

Cash A/c [106,000 shares x $46 per share]

4,876,000

    To Preferred Stock A/c [106,000 shares x $9 per share]

954,000

    To Additional Paid-in Capital – Preferred Stock A/c

[106,000 shares x ($46 - $9)]

3,922,000

[The journal entry passed to record the issue of Preferred stock]

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