Preferred Stock
Definition: Par value of issued preferred shares
Scope:ModerateDifficulty:Moderate
Par value of issued preferred shares
Common Journal Entries
| Account | Debit | Credit |
|---|---|---|
| 1. Issue preferred stock | ||
| Issue 500 shares ($100 par) at $105 each. | ||
| CashAsset+ | $52,500 | |
| Preferred Stock | $50,000 | |
| Additional Paid-In Capital — Preferred | $2,500 | |
| Par to Preferred Stock; premium to APIC. | ||
| 2. Declare preferred dividends | ||
| 8% cumulative preferred on $50,000 par = $4,000. | ||
| Retained EarningsEquity− | $4,000 | |
| Dividends PayableLiability+ | $4,000 | |
| Preferred dividends paid before common. | ||
T-AccountsA visual representation of a ledger account shaped like the letter T. Left side shows debits, right side shows credits.
CashAsset account. Debits increase the balance. Credits decrease the balance.AssetA resource owned by the business. Normal balance: debit. Debits increase, credits decrease.
DebitLeft side of a journal entry. Increases assets and expenses. Decreases liabilities, equity, and revenue.
$52,500.00
◀ Normal bal.
CreditRight side of a journal entry. Increases liabilities, equity, and revenue. Decreases assets and expenses.
$52,500.00
Preferred StockPreferred StockAssetA resource owned by the business. Normal balance: debit. Debits increase, credits decrease.
DebitLeft side of a journal entry. Increases assets and expenses. Decreases liabilities, equity, and revenue.
◀ Normal bal.
CreditRight side of a journal entry. Increases liabilities, equity, and revenue. Decreases assets and expenses.
$50,000.00
$50,000.00
Additional Paid-In Capital — PreferredAdditional Paid-In Capital — PreferredAssetA resource owned by the business. Normal balance: debit. Debits increase, credits decrease.
DebitLeft side of a journal entry. Increases assets and expenses. Decreases liabilities, equity, and revenue.
◀ Normal bal.
CreditRight side of a journal entry. Increases liabilities, equity, and revenue. Decreases assets and expenses.
$2,500.00
$2,500.00
Retained EarningsRetained EarningsEquityThe owner’s residual interest in the business. Normal balance: credit. Credits increase, debits decrease.
DebitLeft side of a journal entry. Increases assets and expenses. Decreases liabilities, equity, and revenue.
$4,000.00
CreditRight side of a journal entry. Increases liabilities, equity, and revenue. Decreases assets and expenses.
Normal bal. ▶
$4,000.00
Dividends PayableDividends PayableLiabilityAn obligation the business owes to others. Normal balance: credit. Credits increase, debits decrease.
DebitLeft side of a journal entry. Increases assets and expenses. Decreases liabilities, equity, and revenue.
CreditRight side of a journal entry. Increases liabilities, equity, and revenue. Decreases assets and expenses.
$4,000.00
Normal bal. ▶
$4,000.00
DurationLong-Term
External Links
- Preferred stock — Wikipedia