Novak Corp. is authorized to issue both preferred and common stock. The par value of the preferred is $50. During the first year of operations, the company had the following events and transactions pertaining to its preferred stock. Feb. 1 Issued 47,000 shares for cash at $52 per share. July 1 Issued 62,500 shares for cash at $56 per share. Journalize the transactions.

Feb 1=> Cash ( debit) = 2,444,000.

Prefered stock (credit) = 2,350,000.

Paid in capital in excess of par value-preferred stock(credit) = 94000.

July 1=> Cash (debit) = 3,500,000.

Prefered stock (credit) = 3,125,000.

Paid in capital in excess of par value-preferred stock(credit) = 375000.

Explanation:

(A). On FEB. 1, the accounts and Explanation is given below:

Cash ( debit) = 2,444,000 {that is from; 47,000 × $52}.

Prefered stock (credit) = 2,350,000 { that is from; 47,000 × $50}.

Paid in capital in excess of par value-preferred stock(credit) = 2,444,000 - 2,350,000 = 94,000.

(B). On JULY 1, the accounts and Explanation is given below;

"July 1 Issued 62,500 shares for cash at $56 per share."

=> Cash (debit) = 62500 × 56 = 3,500,000.

Prefered stock (credit) = 3,125,000 { that is from; 62,500 × $50}.

Paid in capital in excess of par value-preferred stock(credit) = 3,500,000 - 3,125,000 = 375,000.

Dr cash  $2,444,000

Cr preferred stock                                                    $2,350,000

Cr paid-in capital in excess of par-preferred stock $94,000

Dr cash                             $3,500,000

Cr preferred stock                                                    $3,125,000

Cr paid-in capital in excess of par-preferred stock $375,000

Explanation:

The cash proceeds received from the issuance of preferred stock on February 1 is  $ 2,444,000.00    (47,000*$52)out of which  $2,350,000 ($50*47000) is credited to preferred stock and the balance of $94,000($2*47000) is credited to paid-in capital in excess of par-preferred stock

The cash proceeds received from the issuance of preferred stock on July 1 is  $ 3,500,000   (62500*$56)out of which  $ 3,125,000.00  ($50*62500) is credited to preferred stock and the balance of $375,000($6*62,500) is credited to paid-in capital in excess of par-preferred stock

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