Coronado Company is authorized to issue 9000 shares of 9%, $100 par value preferred stock and...
Coronado Company is authorized to issue 9000 shares of 9%, $100 par value preferred stock and 522000 shares of no-par common stock with a stated value of $1 per share. If Coronado issues 4500 shares of preferred stock for land with an asking price of $571000 and a market value of $547000, which of the following would be the journal entry for Coronado to record?
(a) Land 571000
Preferred Stock 450000
Paid-in Capital in Excess of Par-Preferred 121000
(b) Land 547000
Preferred Stock 450000
Paid-in Capital in Excess of Par-Preferred 97000
(c) Land 450000
Preferred Stock 450000
(d) Land 547000
Preferred Stock 547000
Homework Answers
Number of Preferred shares issued to buy land = 4,500
Par value of 1 Preferred share = $100
Market value of land = $547,000
Land will be debited by its market value of $547,000
Preferred stock will be credited by = Number of Preferred shares issued to buy land x Par value of 1 Preferred share
= 4,500 x 100
= $450,000
Amount to be credited to paid in capital in excess of par- preferred = 547,000-450,000
= $97,000
Following Journal entry will be made:
| Date | General Journal | Debit | Credit |
| Land | $547,000 | ||
| Preferred stock | $450,000 | ||
| Paid in capital, in excess of par- preferred | $97,000 |
Correct option is b.
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