Peterson Company Issued 4,000 Shares of Preferred Stock for $240,000

question 13

Multiple Choice

Peterson Company issued 4,000 shares of preferred stock for $240,000. The stock has a par value of $60 per share. The journal entry to record this transaction would:

• A) credit Cash $240,000, debit Common stock $4,000, and debit Paid-in capital $236,000.
• B) debit Cash $240,000, credit Common stock $4,000, and credit Paid-in capital $236,000.
• C) credit Cash $240,000 and debit Preferred stock $240,000.
• D) debit Cash $240,000 and credit Preferred stock $240,000.

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Definitions:

Total Surplus

The total net gain for society derived from the creation and utilization of goods or services, calculated as the combined value of consumer and producer surplus.

Net Welfare Gain

The improvement in societal well-being, measured as the sum of consumer and producer surplus, arising from economic transactions or policy changes.

Perfect Competition

A market structure characterized by a large number of small firms, identical products, and easy entry and exit, which leads to firms being price takers.

Public Ownership

The case in which goods are supplied by the government or by a firm owned by the government to protect the interests of the consumer in response to natural monopoly.