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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

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

The term reserves is used under IFRS with reference to all of the following except:

(a) gains and losses on revaluation of property, plant, and equipment.

(b) capital received in excess of the par value of issued shares.

(c) retained earnings.

(d) fair value differences.

Where can authoritative IFRS guidance related to stockholders’ equity be found?

Swarten Corporation issued 600 shares of no-par common stock for \(8,200. Prepare Swarten’s journal entry if (a) the stock has no stated value, and (b) the stock has a stated value of \)2 per share.

The following note related to stockholders’ equity was reported in Wiebold, Inc.’s annual report.

On February 1, the Board of Directors declared a 3-for-2 stock split, distributed on February 22 to shareholders of record on February 10. Accordingly, all numbers of common shares, except unissued shares and treasury shares, and all per share data have been restated to reflect this stock split.

On the basis of amounts declared and paid, the annualized quarterly dividends per share were \(0.80 in the current year and \)0.75 in the prior year.

Instructions

  1. What is the significance of the date of record and the date of distribution?
  2. Why might Wiebold have declared a 3-for-2 for a stock split?
  3. What impact does Wiebold’s stock split have on (1) total stockholders’ equity, (2) total par value, (3) outstanding shares, and (4) book value per share?
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