To date, shareholders have contributed $75,000 of capital to CIC. Now, in order to finance expansion, CIC is considering selling additional shares of stock. This contemplated sale is planned to finance the expansion. CIC has previously explored expanding by borrowing all necessary funds, but is concerned that doing so would be too risky.

Why would it potentially be less risky for CIC to sell additional stock rather than borrow all funds needed?

CICs articles of incorporation authorize the sale of 50,000 shares of $1 par value common stock and 5,000 shares of $100 par value, 6% cumulative preferred stock. The $75,000 invested to date was for 15,000 shares of common stock. That is, the $75,000 balance in the Stock account is actually composed of $15,000 of Common Stock and $60,000 of Paid-in-Capital in Excess of Par.

The existing shareholders of CIC are concerned about giving up control of the company by issuing additional shares of common stock. Given that concern, what type of stock would you suggest they make available for purchase? Why?

Assume CIC issued 4,000 shares of preferred stock for $600,000. Record this transaction in the horizontal statements model below.

Assets	Equity		Rev	Exp	Net Inc.	Cash Flow
Cash	Pref. Stk.	PIC in Excess