Question - ABC Inc. was incorporated on 1/15/12. Their corporate charter authorized the following capital stock:
Preferred Stock: 7%, par value $100 per share, 100,000 shares.
Common Stock: $1 par value, 500,000 shares.
The following transactions occurred during the year:
1/19/12 - Issued 100,000 shares of common stock for $17 cash per share.
1/31/12 - Issued 3,000 shares of preferred stock for $115 cash per share.
11/1/12 - Repurchased 30,000 shares of common stock for $22 cash per share.
11/20/12- Resold 15,000 shares of common stock purchased on 11/1, at $23 per share.
11/28/12 Resold the remaining 15,000 shares of common stock purchased on 11/1 at $4 per share.
12/1/12 - Declared total dividend of common stock only for $95,000.
Required:
1. Prepare the journal entry for each transaction listed above.
2. Explain the main differences between common and preferred stock.