Question

In: Accounting

Pronghorn Corporation issued 392 shares of $10 par value common stock and 128 shares of $50...

Pronghorn Corporation issued 392 shares of $10 par value common stock and 128 shares of $50 par value preferred stock for a lump sum of $17,424. The common stock has a market price of $20 per share, and the preferred stock has a market price of $90 per share.

Prepare the journal entry to record the issuance.

Solutions

Expert Solution

  • Journal entry as asked

Accounts title

Debit

Credit

Cash

$17,424

Common Stock

$3,920

Paid in Capital in excess of Par - Common Stock

$3,136

Preferred Stock

$6,400

Paid in Capital in excess of Par - Preferred Stock

$3,968

(Stock issued for cash)

  • Working for above amounts

No. of shares

Market Price

Total

Percent of total [not rounded off]

Common Stock

392

$20

$7,840

40.4958678%

Preferred Stock

128

$90

$11,520

59.5041322%

Total fair Market Value

$19,360

100.0000000%

Working

Common Stock

Preferred Stock

A

Total Lumpsum Issue Price

$17,424

$17,424

B

Allocation %

40.495868%

59.504132%

C = A x B

Total

$7,056

$10,368

D

No. of shares

392

128

E

Par Value

$10

$50

F = D x E

Capital Stock credited by

$3,920

$6,400

G = C - F

Paid in Capital credited by

$3,136

$3,968


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