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Chapter 15: Question 7BE (page 811)

Hinges Corporation issued 500 shares of \(100 par value preferred stock for \)61,500. Prepare Hinges journal entry.

Short Answer

Expert verified

In Hinges’ book, the cash account should be debited with the credit account of preferred stock and paid-in capital in excess of par preferred stock.

Step by step solution

01

Meaning of Preferred Stock

Preference shares are a class of sharesin which the shareholder does not have any voting rights. In return, he receives a dividend guarantee on a preferred, usually a dividend inexcess of the equivalent of an ordinary share.

02

Preparing Journal Entries of Hinges

Date

Particular

Folio

Debit USD

$

Credit USD

$

Cash A/c Dr.

61,500

To Preferred stock A/c (500$10) Cr.

50,000

To paid-in capital in excess Cr.

of par preferred stock A/c

11,500

(being share issued )

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Most popular questions from this chapter

(Dividends and Splits) Myers Company provides you with the following condensed balance sheet information.

Asset

Current assets \(40,000

Equipment (net) 250,000

Intangibles 60,000

Total assets \)410,000

Liabilities and Stockholders’ Equity

Current and long-term liabilities \(100,000

Stockholders’ equity

Common stock (\)5 par) \( 20,000

Paid-in capital in excess of par 110,000

Retained earnings 180,000 310,000

Total liabilities and stockholders’ equity \)410,000

Instructions

For each of the following transactions, indicate the dollar impact (if any) on the following five items: (1) total assets, (2) common stock, (3) paid-in capital in excess of par, (4) retained earnings, and (5) stockholders’ equity. (Each situation is independent.)

  1. Myers declares and pays a \(0.50 per share cash dividend.
  2. Myers declares and issues a 10% stock dividend when the market price of the stock is \)14 per share.
  3. Myers declares and issues a 30% stock dividend when the market price of the stock is \(15 per share.
  4. Myers declares and distributes a property dividend. Myers gives one share of its equity investment (ABC stock) for every two shares of Myers Company stock held. Myers owns 10,000 shares of ABC. ABC is selling for \)10 per share on the date the property dividend is declared.
  5. Myers declares a 2-for-1 stock split and issues new shares.

On February 1, 2017, Buffalo Corporation issued 3,000 shares of its \(5 par value common stock for land worth \)31,000. Prepare the February 1, 2017, journal entry.

Buttercup Corporation issued 300 shares of \(10 par value common stock for \)4,500. Prepare Buttercup’s journal entry.

(Preferred Dividends) The outstanding capital stock of Edna Millay Corporation consists of 2,000 shares of \(100 par value, 8% preferred, and 5,000 shares of \)50 par value common.

Instructions

Assuming that the company has retained earnings of $90,000, all of which is to be paid out in dividends, and that preferred dividends were not paid during the 2 years preceding the current year, state how much each class of stock should receive under each of the following conditions.

  1. The preferred stock is noncumulative and nonparticipating.
  2. The preferred stock is cumulative and nonparticipating.
  3. The preferred stock is cumulative and participating. (Round dividend rate percentages to four decimal places.)

Dave Matthew Inc. issues 500 shares of \(10 par value common stock and 100 shares of \)100 par value preferred stock for a lump sum of \(100,000.

Instructions

a) Prepare the journal entry for the issuance when the market price of the common shares is \)165 each and the market price of the preferred is \(230 each. (Round to the nearest dollar.)

b) Prepare the journal entry for the issuance when only the market price of the common stock is known and it is \)170 per share.
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