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

question 17

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 Preferred Stock-$60 Par Value $4,000, and debit Paid-In Capital in Excess of Par-Preferred $236,000.
• B)debit Cash $240,000, credit Preferred Stock-$60 Par Value $4,000, and credit Paid-In Capital in Excess of Par-Preferred $236,000.
• C)credit Cash $240,000 and debit Preferred Stock-$60 Par Value $240,000.
• D)debit Cash $240,000 and credit Preferred Stock-$60 Par Value $240,000.

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Definitions:

Expected Inflation

The anticipated rate at which the general level of prices for goods and services will rise over a period.

Internal Rate

Often referred to as the internal rate of return (IRR), it is the discount rate that makes the net present value (NPV) of all cash flows from a particular project zero.

Net Present Value

A financial metric used to evaluate the profitability of an investment or project, calculated by subtracting the present value of cash outflows from the present value of cash inflows over a period of time.

Payback Period

The amount of time it takes for an investment to generate cash flows sufficient to recover its initial cost.