Innovative Media issues 1,000 shares of 8%, $50 par value preferred stock for $60 per share. Which of the following will be recorded at the time of the issue?Multiple ChoiceA credit to Preferred Stock for $10,000A credit to Preferred Stock for $60,000A credit to Additional Paid-in Capital for $10,000A debit to Cash for $50,000

The correct answer is:

A credit to Preferred Stock for $50,000 and a credit to Additional Paid-in Capital for$10,000.

Here's the step-by-step explanation:

1. The par value of the preferred stock is $50. This is the value assigned per share by the company's charter. There are 1,000 shares, so the total par value is 1,000 shares *$50/share = $50,000. This amount will be credited to the Preferred Stock account.

2. The shares were sold for $60 per share, which is$10 more than the par value. This excess is known as additional paid-in capital. So, the Additional Paid-in Capital will be credited for 1,000 shares * $10/share =$10,000.

3. The total amount of cash received from the issue is the number of shares times the selling price per share, which is 1,000 shares * $60/share =$60,000. This will be debited to the Cash account (not mentioned in the options).

So, the journal entry at the time of the issue will be:

• Debit Cash $60,000
• Credit Preferred Stock $50,000
• Credit Additional Paid-in Capital $10,000