Accounting for preferred stock at issuance is similar

Accounting for preferred stock at issuance is similar to that for
common stock.
Accounting for Preferred Stock
LO 2
Cumulative Preferred Stock : if any dividends have been omitted in the
past, they must be paid out to preferred shareholders first, before
common shareholders can receive dividends.

13-45
Illustration: Stine Corporation issues 10,000 shares of $10
par value preferred stock for $12 cash per share. The journal
entry to record the issuance is:
Preferred stock may have a par value or no-par value.
Accounting for Preferred Stock
Cash 120,000
Preferred Stock
(10,000 x $10)
100,000
Paid-in Capital in Excess of Par—
Preferred Stock 20,000
LO 2

DO IT!
Issuance of Stock 2
Cayman Corporation begins operations on March 1 by issuing 100,000
shares of $1 par value common stock for cash at $12 per share. On
March 15 , it issues 5,000 shares of common stock to attorneys in
settlement of their bill of $50,000 for organization costs. On March 28 ,
Cayman Corporation issues 1,500 shares of $10 par value preferred
stock for cash at $30 per share. Journalize the issuance of the
common and preferred shares, assuming the shares are not publicly
traded.

13-47
LO 2
DO IT!
Issuance of Stock 2
Cayman Corporation begins operations on March 1 by issuing 100,000
shares of $1 par value common stock for cash at $12 per share. On
March 15, it issues 5,000 shares of common stock to attorneys in
settlement of their bill of $50,000 for organization costs. On March 28,
Cayman Corporation issues 1,500 shares of $10 par value preferred
stock for cash at $30 per share. Journalize the issuance of the
common and preferred shares, assuming the shares are not publicly
traded.
Mar. 15
Organization Expense 50,000
Common Stock (5,000 x $1) 5,000
Paid-in Capital in Excess of Par—
Common Stock 45,000

DO IT!
Issuance of Stock 2
Cayman Corporation begins operations on March 1 by issuing 100,000
shares of $1 par value common stock for cash at $12 per share. On
March 15, it issues 5,000 shares of common stock to attorneys in
settlement of their bill of $50,000 for organization costs. On March 28,
Cayman Corporation issues 1,500 shares of $10 par value preferred
stock for cash at $30 per share. Journalize the issuance of the
common and preferred shares, assuming the shares are not publicly
traded.

13-49
Paid-in Capital
Retained Earnings
Account
Paid-in Capital
in Excess of Par
Account
Less:
Treasury Stock
Account
Two Primary
Sources of
Equity
Common Stock
Account
Preferred Stock
Account
LO 3
LEARNING
OBJECTIVE