Question

Logan Corporation issues 40,000 shares of $50 par value preferred stock for cash at $60 per share. In the stockholders' equity section, the effects of the transaction above will be reporteda. entirely within the capital stock section.b. entirely within the additional paid-in capital section.c. under both the capital stock and additional paid-in capital sections.d. entirely under the retained earnings section.

Answer 1

c. under both the capital stock and additional paid-in capital sections

Step-by-step explanation:

In the given question, the corporation issued 40,000 shares for $50 par value and for cash $60 per share

So, it affects the two accounts, one is preferred stock and the second is additional paid-in capital.

The preference stock should be increased by $2,000,000 (40,000 shares × $50)

Whereas the difference of $400,000 (40,000 shares × $10) would be transferred to additional paid in the capital account

And, the preferred stock has come under a capital stock account that's why we considered both the things