Nice Corporation issues 40000 shares of $100 par value preferred stock for cash at $110 per share.Recording the transaction will consist of an increase to Cash for $4400000 and increases to

Question

Quizplus · Accepted Answer

The sale of preferred stock for an amount above par value results in a credit to Preferred Stock for the par value of the shares issued ($100 x 40,000 = $4,000,000) and a credit to Paid-in Capital in Excess of Par Value-Preferred Stock for the amount received above par value ($10 x 40,000 = $400,000). Therefore, the correct answer is B. Option A is incorrect because it only records an increase to Preferred Stock but not the additional amount received above par value. Option C is incorrect because it assumes that the company is distributing some of the proceeds as dividends to retained earnings, but the question does not mention such a distribution. Option D is incorrect because it only records an increase to Paid-in Capital from Preferred Stock, which does not reflect the allocation between par value and additional paid-in capital.

Nice Corporation Issues 40000 Shares of $100 Par Value Preferred