Question

A company is authorized to issue 50,000 $50 par value, 8%, cumulative, fully participapreference shares, and 750,000 $5 par value ordinary shares. Prepare journal entries to rethe following selected transactions that occurred during the company's first yearoperations:May 5July 20Dec 20Exchanged 2,000 preference shares for a building with a market value of$135,000Sold 1,550 preference shares for $50 cash per shareSold 1,000 preference shares at $55 cash per share.7. A company reports the following shareholders' equity:Pad-in Capital:​

a) May 5: Preference Shares $2,000 × $50 = $100,000; Building $135,000
b) July 20: Cash $1,550 × $50 = $77,500; Preference Shares $1,550 × $50 = $77,500
c) Dec 20: Cash $1,000 × $55 = $55,000; Preference Shares $1,000 × $50 = $50,000; Paid-in Capital $5,000

Answer 1

To prepare the journal entries for the selected transactions, we need to understand the nature of these transactions and their impact on the company's financials.

Step-by-step explanation:

To prepare the journal entries for the selected transactions, we need to understand the nature of these transactions and their impact on the company's financials. Here are the journal entries for each transaction:

May 5:

• Debit: Building ($135,000)
• Credit: Preference Shares ($100,000)
• Credit: Paid-in Capital ($35,000)

July 20:

• Debit: Cash ($77,500)
• Credit: Preference Shares ($77,500)

Dec 20:

• Debit: Cash ($55,000)
• Debit: Paid-in Capital ($5,000)
• Credit: Preference Shares ($50,000)