A company issued 1,000 shares of $1 par value preferred stock for $5 per share. What is true about the journal entry to record the issuance?

Question

A company issued 1,000 shares of $1 par value preferred stock for $5 per share. What is true about the journal entry to record the issuance?

 

A. Debit Preferred Stock $5,000.

 

B. Credit Cash $5,000.

 

C. Credit Preferred Stock $5,000.

 

D. Credit Additional Paid-In Capital $4,000.

Answer 1

Cash $5,000 (1,000 x $5) 

                                        Preferred Stock                                      $1,000 (1,000 x $1)

                                        Additional Paid-in Capital/Preferred Stock $4,000 (1,000 x $4)

 

Answer is D