Question

x-co issued 1,000 shares of its 5%, $10 par value, cumulative preferred stock for $100 cash per share. the journal entry to record this event includes:

Answer 1

The journal entry to record the issuance of x-co's preferred stock for $100 cash per share is a debit to Cash for $100,000, a credit to Preferred Stock for $10,000, and a credit to Paid-in Capital in Excess of Par - Preferred Stock for $90,000.

Step-by-step explanation:

The journal entry to record the issuance of 1,000 shares of x-co's 5%, $10 par value, cumulative preferred stock for $100 cash per share is as follows:

1. Debit Cash for $100,000 (1,000 shares x $100)
2. Credit Preferred Stock for $10,000 (1,000 shares x $10 par value)
3. Credit Paid-in Capital in Excess of Par - Preferred Stock for $90,000 (1,000 shares x ($100 - $10))

This journal entry reflects the increase in cash (asset) and the issuance of preferred stock (equity) to shareholders, while also accounting for the difference between the par value and the cash received as additional paid-in capital.