Question

Journalize the entry for Uptown Corporation when it issues 20,000 shares of $10, 4% preferred stock for $18 per share.

a) Debit Cash $360,000; Credit Preferred Stock $200,000; Credit Paid-In Capital in Excess of Par $160,000
b) Debit Cash $360,000; Credit Preferred Stock $200,000; Credit Common Stock $160,000
c) Debit Cash $200,000; Credit Preferred Stock $160,000; Credit Paid-In Capital in Excess of Par $200,000
d) Debit Cash $200,000; Credit Preferred Stock $160,000; Credit Common Stock $200,000

Answer 1

The correct journal entry for the issuance of preferred stock by Uptown Corporation is: Debit Cash $360,000; Credit Preferred Stock $200,000; Credit Paid-In Capital in Excess of Par $160,000, reflecting the amount of cash received, the par value of the preferred stock, and the excess received over par value.

Step-by-step explanation:

The correct journal entry for Uptown Corporation when it issues 20,000 shares of $10, 4% preferred stock for $18 per share is: Debit Cash $360,000; Credit Preferred Stock $200,000; Credit Paid-In Capital in Excess of Par $160,000.

Here's the step-by-step explanation of the journal entry:

1. Calculate the total cash received by multiplying the number of shares issued by the issue price per share: 20,000 shares * $18 per share = $360,000. This is the amount that will be debited to Cash.
2. The Preferred Stock account should be credited by the par value of the shares issued, which is 20,000 shares * $10 par value = $200,000.
3. The remaining amount, which is the difference between the cash received ($360,000) and the par value of preferred stock credited ($200,000), amounts to $160,000. This amount represents the Paid-In Capital in Excess