Question

Oriole Inc. issues 500 shares of $10 par value common stock and 100 shares of $100 par value preferred stock for a lump sum of $110,000.

(a) Prepare the journal entry for the issuance when the market price of the common shares is $180 each and market price of the preferred is $225 each.

(b) Prepare the journal entry for the issuance when only the market price of the common stock is known and it is $190 per share.

Answer 1

a)	Market Value
	Common Stock	90,000	=500*180
	Preferred Stock	22,500	=100*225
	Total	$ 112,500
	Allocation of Cash Received
	Common Stock	88,000	=110000*90000/112500
	Preferred Stock	22,000	=110000*22500/112500
	Total	$ 110,000

	Account Titles	Debit $	Credit $
	Cash	110,000
	Common Stock (500 x 10 )		5,000
	Paid in capital in excess of par-Common Stock ( 88,000 - 5,000 )		83,000
	Preferred Stock (100 x 100 )		10,000
	Paid in capital in excess of par-Preferred Stock ( 22,000 - 10,000 )		12,000
b.)	Account Titles	Debit $	Credit $
	Cash	110,000
	Common Stock ( 500 x 10 )		5,000
	Paid in capital in excess of par-Common Stock ( 500 x 180 )		90,000
	Preferred Stock (100 x 100 )		10,000
	Paid in capital in excess of par-Preferred Stock		5,000