Question

Hinges Corporation issued 500 shares of $100parvaluepreferredstockfor$61,500. Prepare Hinges journal entry.

Short answer

In Hinges’ book, the cash account should be debited with the credit account of preferred stock and paid-in capital in excess of par preferred stock.

Step-by-step solution

Meaning of Preferred Stock

Preference shares are a class of sharesin which the shareholder does not have any voting rights. In return, he receives a dividend guarantee on a preferred, usually a dividend inexcess of the equivalent of an ordinary share.

Preparing Journal Entries of Hinges

Date	Particular	Folio	Debit USD $	Credit USD $
	Cash A/c Dr.		61,500
	To Preferred stock A/c (500$10) Cr.			50,000
	To paid-in capital in excess Cr. of par preferred stock A/c			11,500
	(being share issued )