Peterson Company was granted a charter that authorized the following share capital:
Preferred shares: 8 percent, par value $ 25, 20,000 shares
Common shares: No par value, 100,000 shares
During the first year, 2014, the following selected transactions occurred in the order given:
a. Sold 30,000 common shares at $ 35 cash per share and 5,000 preferred shares at $ 25 cash per share. Collected cash and issued the shares immediately.
b. Issued 2,000 preferred shares as full payment for a plot of land to be used as a future plant site. Assume that the share was selling at $ 25.
c. Declared and paid the quarterly cash dividend on the preferred shares.
d. At December 31, 2014, the income summary account has a credit balance of $ 76,000.
1. Prepare the journal entries to record each of these transactions.
2. Explain the economic difference between acquiring an asset for cash and acquiring it by issuing shares. Is it “better” to acquire a new asset without having to give up another asset?

  • CreatedAugust 04, 2015
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