Which statement describes the relationship of par value to the fair value of stock?

• The par value is less than the fair value of a stock.
• The par value is more than the fair value of a stock.
• The par value is equal to the fair value of a stock.
• The par value is unrelated to the fair value of a stock

A company issues 10,000 shares of $8 par value convertible preferred stock for $12 per share. How would the company record this transaction?

• Debit Cash $120,000; Credit Preferred stock $120,000.
• Debit Cash $120,000; Credit Common stock $80,000; Credit Paid-in capital in excess of par $40,000
• Debit Cash $120,000; Credit Preferred stock $80,000; Credit Paid-in capital in excess of par $40,000
• Debit Preferred stock $120,000; Credit Cash $120,000.

Answer rating: 100% (QA)

option 4 The par value is unrelated to the fair value of a s... View the full answer