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    Preferred stock entries and presentation - Mezzanine

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    Suppose Sheila and Ed issue 200,000 shares of $1 par value preferred stock at $5 per share. What is the entry for this issuance? How is this transaction treated in the equity section of the balance sheet?

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    The entry is similar to the recording of an issue of common stock:

    Debit Cash $1,000,000
    Credit Preferred stock, at par $200,000
    Credit Additional paid in capital $800,000

    In the equity ...

    Solution Summary

    The solution explains about the recording of the sale of preferred stock and the balance sheet placement. Also included is data on current accounting theory regarding debt versus equity with preferred stocks.