Ranier Company is authorized to issue 10,000 shares of 8%, $100 par value preferred stock and 500,000 shares of no-par common stock with a stated value of $1 per share.If Ranier issues 5,000 shares of preferred stock for land with an asking price of $575,000 and a market value of $550,000, which of the following would 1.

Question

Quizplus · Accepted Answer

The issue of preferred stock for land does not involve a cash inflow, so options A and B are not applicable. Option C is incorrect because the market value of the land is less than the asking price, resulting in a decrease in shareholder equity.

Option D is the best choice because the issuance of preferred stock increases shareholder equity by $500,000 (5,000 shares x $100 par value), and there is no change in the value of the land as the market value is less than the asking price.

Ranier Company Is Authorized to Issue 10,000 Shares of 8