Franko Company. was incorporated on 2/01/14. Their corporate charter authorized the following capital stock:
Preferred Stock: 7%, par value $105 per share, 120,000 shares.
Common Stock: $5 par value, 1,000,000 shares.
The following transactions occurred during the year:
3/15/14 - Issued 200,000 shares of common stock for $18 cash per share.
4/25/14 - Issued 7,000 shares of preferred stock for $125 cash per share.
8/16/14 - Repurchased 40,000 shares of common stock for $25 cash per share.
10/5/14 - Declared dividend of $150,000.
Required:
1. Prepare the journal entry for each transaction listed above.
2. In your own words, explain the main differences between common and preferred stock.