Question

On March 8, Kumar Management Inc., a publicly traded company, issued 5,600 preferred shares for cash of $29 per share. On April 20, when the shares were trading at $35, the company issued an additional 3,400 preferred shares in exchange for land with a fair value of $123,800. (a) Your answer is partially correct. Prepare the journal entries for each transaction.

Answer 1

The journal entry for issuing preferred shares for cash and in exchange for land can be recorded using specific debit and credit accounts.

Step-by-step explanation:

The journal entry for the first transaction, when Kumar Management Inc. issued 5,600 preferred shares for cash of $29 per share, would be:

1. Debit Cash ($29 per share x 5,600 shares) for $162,400
2. Credit Preferred Stock ($29 per share x 5,600 shares) for $162,400

The journal entry for the second transaction, when the company issued an additional 3,400 preferred shares in exchange for land worth $123,800, would be:

1. Debit Preferred Stock ($29 per share x 3,400 shares) for $98,600
2. Debit Land for $123,800
3. Credit Preferred Stock ($29 per share x 3,400 shares) for $98,600
4. Credit Paid-In Capital in Excess of Par - Preferred Stock for ($29 per share x 3,400 shares - $123,800) = $22,600