Cooke Corporation issues 10,000 shares of $50 par value preferred stock for cash at $60 per share.In the stockholders' equity section, the effects of the transaction above will be reported

Question

Quizplus · Accepted Answer

Both the par value and the amount received above par value must be recorded in the stockholders' equity section. The par value of the preferred stock will be recorded within the capital stock section, while the excess received above par value will be recorded in the additional paid-in capital section. This is known as a "premium on stock." Therefore, the effects of the transaction will be reported under both the capital stock and additional paid-in capital sections.

Cooke Corporation Issues 10,000 Shares of $50 Par Value Preferred