Question

Coronado Company is authorized to issue 9000 shares of 9%, $100 par value preferred stock and 522000 shares of no-par common stock with a stated value of $1 per share. If Coronado issues 4500 shares of preferred stock for land with an asking price of $571000 and a market value of $547000, which of the following would be the journal entry for Coronado to record?

(a) Land 571000
Preferred Stock 450000
Paid-in Capital in Excess of Par-Preferred 121000
(b) Land 547000
Preferred Stock 450000
Paid-in Capital in Excess of Par-Preferred 97000
(c) Land 450000
Preferred Stock 450000
(d) Land 547000
Preferred Stock 547000

Answer 1

(b) Land 547000

Preferred Stock 450000

Paid-in Capital in Excess of Par-Preferred 97000

Step-by-step explanation:

The journal entry is shown below;

Land $547,000

To Preferred stock $450,000 (4,500 shares × $100)

To Paid in capital, in excess of par- preferred $97,000

(being the preferred stock is issued in exchange of land)

Here the land is debited as it increased the asset and credited the preferred stock & paid in capital as it increased the equity

Therefore the correct option is b.