Question

On August 20, Max, Inc. issues 100 shares of $1 par value preferred stock for $3,000 cash. The entry to record this transaction would include a (debit/credit) to the preferred stock account in the amount of $ .

Answer 1

Credit of $100 to preferred stock account

Step-by-step explanation:

The amount of $3000 implies an increase to cash which would be recorded by debiting cash account ,on the other hand, the credit is split into two accounts, with par value of $100 ($1*100) being credited to preferred stock account and the balance of $2900($3000-$100) being credited to paid in capital in excess of par for preferred stock account.

Dr cash $3000

Cr Preferred stock account $100

Cr paid-in capital in excess of par value $2900