# MacKenzie Mining Corporation is authorized to issue 50,000 shares of $500 par value 7% preferred stock. It is also authorized to issue 5,000,000 shares of$3 par value common stock. In its first year, the corporation has the following transactions: Journalize the transactions.

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### Principles of Accounting Volume 1

19th Edition
OpenStax
Publisher: OpenStax College
ISBN: 9781947172685

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### Principles of Accounting Volume 1

19th Edition
OpenStax
Publisher: OpenStax College
ISBN: 9781947172685
Chapter 14, Problem 4PB
Textbook Problem
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## MacKenzie Mining Corporation is authorized to issue 50,000 shares of $500 par value 7% preferred stock. It is also authorized to issue 5,000,000 shares of$3 par value common stock. In its first year, the corporation has the following transactions:Journalize the transactions.

To determine

To journalize:

The transactions relating to the issuance of shares.

Introduction:

Common stock is owners’ capital contributed in the business. Holders of the common stock reserve the right to participate in voting. Profits are distributed to common stockholders and they receive assets in the event of dissolution of the company.

### Explanation of Solution

Record issue of shares:

 Date Account Debit($) Credit($) May1 Cash 2,250,000 Preferred stock (3,000×$500) 1,500,000 Additional Paid-in Capital from Preferred Stock (3,000×$250) 750,000 To record the issue of preferred stock for cash)

Table (1)

• Cash is an asset and it is increased by $2,250,000. Therefore, cash account is debited with$2,250,000.
• Preferred stock is a capital account and it is increased by $1,500,000. Therefore, preferred stock accountis credited with$1,500,000.
• Additional Paid-in Capital from Preferred Stock is a capital account and it is increased by $750,000. Therefore, Additional Paid-in Capital from Preferred Stock accountis credited with$750,000.

Record issue of shares:

 Date Account Debit($) Credit($) May 23 Cash 75,000 Common stock (6,000×$3) 18,000 Additional Paid-in Capital from Common Stock (6,000×$9

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