In: Accounting
Parker Corporation has issued 1,700 shares of common stock and 340 shares of preferred stock for a lump sum of $62,000 cash.
Give the entry for the issuance assuming the par value of the common stock was $5 and the fair value $30, and the par value of the preferred stock was $40 and the fair value $50. (Each valuation is on a per share basis and there are ready markets for each stock.) (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.)
Account Titles and Explanation |
Debit |
Credit |
List of Accounts
Give the entry for the issuance assuming the same facts as the par value of the common stock was $5 and the fair value of $25 per share, and the par value of the preferred stock was $40 and has no ready market. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.)
Account Titles and Explanation |
Debit |
Credit |
Answer 1 .
Working Note :
Total fair value of common stock (1,700 shares * $30) | $51,000 |
Total fair value of preferred stock (340 shares * $50) | $17,000 |
Total | $68,000 |
Common Stock ; [($51,000 / $68,000) * $62,000] | $46,500 |
Preferred Stock ; [($17,000 / $68,000) * $62,000] | $15,500 |
Journal Entry :
|
Debit | Credit | ||
---|---|---|---|---|
Cash | 62,000 | |||
Common Stock (1,700 shares *$5) | 8,500 | |||
Preferred Stock (340 shares *$40) | 13,600 | |||
Paid-in Capital in Excess of Par - Common Stock ($46,500 - $8,500) | 38,000 | |||
Paid-in Capital in Excess of Par - Preferred Stock ($15,500 - $13,600) | 1,900 | |||
(To record lump sum purchase of common & preferred stocks) |
Answer 2 :
Account Titles and Explanation | Debit | Credit |
---|---|---|
Cash | 62,000 | |
Common Stock (1,700 shares *$5) | 8,500 | |
Preferred Stock (340 shares *$40) | 13,600 | |
Paid-in Capital in Excess of Par - Common Stock [(1,700 shares *($25 - $5)] | 34,000 | |
Paid-in Capital in Excess of Par - Preferred Stock (Bal. fig) | 5,900 | |
(To record lump sum purchase of common & preferred stocks) |