A company issues 1.07 million shares of preferred stock with a par value of $5.5

Question

A company issues 1.07 million shares of preferred stock with a par value of $5.50 at its market price of $29.50 per share. The issuance should be recorded with a debit to Cash for:

a)$25.68 million, a credit to Additional Paid-in Capital for $5.89 million, and a credit to Preferred Stock for $31.57 million.

b)$31.57 million, a credit to Preferred Stock for $5.89 million, and a credit to Additional Paid-in Capital for $25.68 million.

c)$5.89 million and a credit to Preferred Stock for $5.89 million.

d)$31.57 million and a credit to Preferred Stock for $31.57 million.

a)$25.68 million, a credit to Additional Paid-in Capital for $5.89 million, and a credit to Preferred Stock for $31.57 million.

Explanation / Answer

b)$31.57 million, a credit to Preferred Stock for $5.89 million, and a credit to Additional Paid-in Capital for $25.68 million.

a debit to Cash for $31.57 million, a credit to Preferred Stock for $5.89 million, and a credit to Additional Paid-in Capital for $25.68 million.

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