A Company Is Authorized to Issue 50,000 Shares of $50

question 66

Essay

A company is authorized to issue 50,000 shares of $50 par value,8%,cumulative,fully participating preferred stock and 750,000 shares of $5 par value common stock.Prepare journal entries to record the following selected transactions that occurred during the company's first year of operations:
May 5 Exchanged 2,000 shares of preferred stock for a building with a market value of
$135,000.
July 20 Sold 1,550 shares of preferred stock for $50 cash per share.
Dec.20 Sold 1,000 shares of preferred stock at $55 cash per share.

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Definitions:

Utility Function

A mathematical representation of a consumer's preference, showing the level of satisfaction or happiness derived from consuming various bundles of goods and services.

Income Effect

The impact of income changes on an individual or economic level on the demand for various products or services.

Substitution Effect

The adjustment in how consumers spend due to differences in the prices between goods, leading to the substitution of one product for another.

Inferior Good

A type of good whose demand decreases when consumer income rises, unlike normal goods, which have a positive correlation with income.