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Coronado Industries has issued 2,300 shares of common stock and 460 shares of preferred stock for...

Coronado Industries has issued 2,300 shares of common stock and 460 shares of preferred stock for a lump sum of $87,000 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.

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 $26 per share, and the par value of the preferred stock was $40 and has no ready market.

Solutions

Expert Solution

1.) Market Value Amount $
Common Stock 69,000 =2300*30
Preferred Stock 23,000 =460*50
Total 92,000
Allocation of Cash Received
Common Stock 65,250 =87000*69000/92000
Preferred Stock 21,750 =23000*87000/92000
Total 87,000
Account Titles Debit $ Credit $
Cash 87,000
Common Stock (2,300 x 5 ) 11,500
Paid in capital in excess of par-Common Stock ( 65,250 - 11,500 ) 53,750
Preferred Stock (460 x 40 ) 18,400
Paid in capital in excess of par-Preferred Stock ( 21,750 - 18,400 )     3,350
2.) Account Titles Debit $ Credit $
Cash 87,000
Common Stock (2,300 x 5 ) 11,500
Paid in capital in excess of par-Common Stock ( 2,300 x 21 ) 48,300
Preferred Stock (460 x 40 ) 18,400
Paid in capital in excess of par-Preferred Stock     8,800

ekkarill92 answered 1 year ago
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