42) Mufti Company issued 1,500 shares of its $1 par value common stock. The market price on the day of sale was $15 per share. Describe the effect of this transaction on each of the following items:
1. Cash
2. Total paid-in capital
3. Capital stock
4. Additional paid-in capital
43) Marcy’s Catering has been so successful that the business needs to expand its facility. Marcy has decided to change the business from a sole proprietorship to a corporation in order to raise more money from the sale of stock to investors. Marcy’s accountant has prepared a proposed shareholders’ equity section of the balance sheet. Explain to Marcy what each line item represents.
Shareholders' equity:
Paid-in capital:
Preferred stock
Common stock
Additional paid-in capital
Treasury stock
Retained earnings
Total shareholders equity
44) Vest, Inc. received cash from selling 100 shares of its $1 par value common stock at $10 per share. Show the effect of issuing stock on the accounting equation, including both account titles and amounts.
Shareholders' equity
Assets
|
Liabilities
|
Contributed capital
|
Retained earnings
|
|
|
|
|
45) Out of Africa had the following shareholders’ equity section on its balance sheet as of
December 31.
Preferred stock: $100 par, 6%, cumulative
|
$100,000
|
Common stock: $1 par value
|
25,000
|
Additional paid-in capital
|
300,000
|
Retained earnings
|
57,000
|
Calculate the following:
a. Number of shares of preferred stock outstanding
b. Number of shares of common stock outstanding
46) What is preferred stock?