A Company Sells 1,000,000 Shares of $0

question 88

Multiple Choice

A company sells 1,000,000 shares of $0.50 par value preferred stock.The selling price for the stock was $3,000,000.The stated dividend is $1 per share and the stock is cumulative.What journal entry is needed for the sale?

• A)debit Cash $3 million and credit Preferred Stock $3,000,000
• B)debit Cash $3 million,credit Preferred Stock $500,000 and credit Paid-in Capital in Excess of Par-Preferred $2.5 million
• C)debit Cash $3 million and credit Paid-in Capital in Excess of Par-Preferred $3 million
• D)debit Cash $3 million and credit Retained Earnings $3 million

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Definitions:

Bell Shaped Distribution

Also known as a normal distribution, it is a probability distribution that has a symmetrical bell-shaped graph, indicating that most of the data points are concentrated around the mean.

Supply And Demand

Fundamental economic principles that describe the relationship between the availability of a product or service (supply) and the desire of potential buyers (demand).

Bell Shaped Distribution

A probability distribution that is symmetrical and tapers towards the tails, resembling a bell; commonly known as the normal distribution.

Price-Earnings Ratios

A metric used to value a company by comparing its current share price to its per-share earnings.