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Cornerstones of Financial Accounti...

4th Edition
Jay Rich + 1 other
ISBN: 9781337690881

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Cornerstones of Financial Accounti...

4th Edition
Jay Rich + 1 other
ISBN: 9781337690881
Textbook Problem
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Recording the Sale of Common and Preferred Stock

At the end of its first year of operations, Mulligan Corporation has outstanding shares of 96,000 common stock and 1,900 preferred stock. The State of Ohio authorized Mulligan to issue 3,000 shares of 6% preferred stock with a par value of $40 per share and 110,000 shares of common stock with a par value of $0.01 per share. Any common stock sold during the year had a selling price of $47 per share. Mulligan’s preferred stock was issued at $17.50.

Required:

Prepare the journal entry to record any issuance of stock during the year.

To determine

Concept introduction:

Stocks (Common Stock and Preferred Stock):

There are two types of the share capital of a company. Common Stock represents the Common shares issued to the shareholders and preferred stock represents the preference shares issued. Preference shares are given preference in payment of dividends and repayment of capital. Common shareholders get the inbuilt right to vote in decisions of the company and preference shareholders generally do not get this right but they may get voting rights with special provisions.

To indicate:

The Journal entry to record the issuance of stock.

Explanation

The Journal entry to record the issuance of stock is explained as follows:

Journal Entries
Date Account Titles Debit Credit
Cas...

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