A Company Issues 1 Million Shares of Preferred Shares with a Price

question 51

Multiple Choice

A company issues 1 million shares of preferred shares with a price of $26 per share.The issuance should be recorded as:

• A)a debit to Cash of $26 million and a credit to Preferred Shares of $26 million.
• B)a debit to preferred shares of $26 million and a credit to cash of $26 million.
• C)a debit to Cash of $24 million,a debit to Treasury Shares of $2 million,and a credit to Preferred Shares of $26 million.
• D)a debit to Cash of $26 million,a credit to Preferred Shares of $2 million,and a credit to Additional Paid-in Capital of $24 million.

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Definitions:

Federal Court System

The three-tiered judicial system of the United States consisting of district courts, appellate courts, and the Supreme Court, which interprets and applies federal laws and Constitution.

Diversity-of-Citizenship

A basis for federal court jurisdiction when parties in a lawsuit are citizens of different states or a foreign country, allowing for cases to be heard in federal court.

Plaintiff

The party in a legal dispute who initiates the lawsuit, seeking relief or damages from the defendant.

Defendant

A person, company, or entity against whom a lawsuit is filed in a court of law.