ABC Inc, was incorporated on 1/15/12. Their corporate charter authorized th foll
ID: 2382237 • Letter: A
Question
ABC Inc, was incorporated on 1/15/12. Their corporate charter authorized th following capital stock: Prefered Stock: 7%, Par value $100 per share, 100,000 shares.
Common stock: $1 par value, 500,000 shares.
THe following ransactions occured during the year:
1/19/12-Issued 100,000 shares of common stock for $17 cash per share.
1/31/12- Issued 3,000 shares of preferred stock for $115 cash per share.
11/1/12- Repurchased 30,000 shares of commone stock for $22 cash per share.
12/1/12- Declared and paid a total dividened of $95,000.
Required:
1. Prepare the journal entry for each transaction listed above.
2. In your own words, explain the main differences between common and preferred stock.
Explanation / Answer
General Journal ABC Inc.
Date Account Debit Credit
1/19/12 Cash 1,700,000
Common Stock 100,000
Additional Paid in Capital 1,600,000
1/31/12 Cash 345,000
Preferred Stock 300,000
Additional Paid in Capital 45,000
11/1/12 Cash 660,000
Treasury Stock 660,000
12/1/12 Cash 95,000
Dividend 95,000
Preffred stock are those stock who are given the preferential right for receiving the dividend..common stockholders are paid after paying dividend to preffered stockholder