Issuance of Preferred Stock

Preferred stock usually has a par value. Like common stock, it can be sold at a price different from par. Preferred stock is recorded in its own separate capital accounts. To illustrate, if Dillon Snowboards issues 50 shares of $100 par value preferred stock for $6,000 cash on July 1, 2011, the entry is



The equity section of the year-end balance sheet for Dillon Snowboards, including preferred stock, is shown in Exhibit 13.10. (This exhibit assumes that common stock was issued at par.) Issuing no-par preferred stock is similar to issuing no-par common stock. Also, the entries for issuing preferred stock for noncash assets are similar to those for common stock.

EXHIBIT 13.10 Stockholders’ Equity with Common and Preferred Stock