Final answer:
When Canadian issues 1,000 shares of $30 par value and preferred stock $40, we record it as an increase in stockholders' equity. To record the issuance, we debit the stockholders' equity account for the par value of each share and credit the Additional Paid-in Capital account for the excess amount received over the par value.
Step-by-step explanation:
When Canadian issues 1,000 shares of $30 par value and preferred stock $40, we record it as an increase in stockholders' equity. This is because issuing shares increases the company's capital and ownership claims.
To record the issuance, we would debit the stockholders' equity account for the par value of each share. In this case, we would debit the Common Stock account for $30,000 (1,000 shares x $30 par value). We would also credit the Additional Paid-in Capital account for the excess amount received over the par value. So, if the preferred stock was issued at $40 each, we would credit the Additional Paid-in Capital account for $10,000 (1,000 shares x ($40 - $30)).
Overall, the journal entry to record the issuance of 1,000 shares of $30 par value common stock and preferred stock $40 would be:
- Debit Common Stock - $30,000
- Debit Preferred Stock - $40,000
- Credit Additional Paid-in Capital – $10,000