Question

Hinges Corporation issued 500 shares of \(100 par value preferred stock for \)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 )