Question

A company issued 800 shares of $4 par value preferred stock for $5 per share. What is true about the journal entry to record the issuance

Answer 1

This question is incomplete. I tried looking for the full question but i could not find it.

However, I have provided the notes below to help you with important principles on the issuance of Par Value stated Preference Stock.

Notes :

It is important to remember that any amount paid in excess of par value when it comes to par value stated stocks is accounted for in a stock premium reserve.

Journal Entry to record issuance of preferred stock is :

Cash $4,000 (debit)

Preference Stock $3,200 (credit)

Paid In Excess of Par $800 (credit)

Thus, of the $5 , 1$ was paid in excess and the total to go in the reserve is $800.