A Company Issues 100,000 Shares of Preferred Stock for $40

question 18

Multiple Choice

A company issues 100,000 shares of preferred stock for $40 a share. The stock has a fixed dividend rate of 5% and a par value of $3 per share. The company records the issuance with a:

• A) debit of $4 million to Cash and a credit of $4 million to Preferred Stock.
• B) debit of $300,000 to Cash and a credit of $300,000 to Preferred Stock.
• C) debit of $4 million to Cash, a credit of $300,000 to Preferred Stock, and a credit of $3.7 million to Additional Paid-in Capital.
• D) debit of $300,000 to Cash, a debit of $3.7 million to Long-term Investments, a credit of $300,000 to

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