Question

Nash Inc. issues 500 shares of $10 par value common stock and 100 shares of $100 par value preferred stock for a lump sum of $101,000.

(a)		Prepare the journal entry for the issuance when the market price of the common shares is $176 each and market price of the preferred is $220 each.
(b)		Prepare the journal entry for the issuance when only the market price of the common stock is known and it is $172 per share.

Answer 1

		Debit	Credit
a	Cash	101000
	Common Stock		5000	=500*10
	Paid in Capital in excess of par-Common Stock		75800	=80800-5000
	Preferred Stock		10000	=100*100
	Paid in Capital in excess of par-Preferred Stock		10200	=20200-10000
b	Cash	101000
	Common Stock		5000
	Paid in Capital in excess of par-Common Stock		81000	=500*(172-10)
	Preferred Stock		10000
	Paid in Capital in excess of par-Preferred Stock		5000
	Workings for (a):
	Market value of Common Stock	88000	=500*176
	Market value of Preferred Stock	22000	=100*220
	Total Market value	110000
	Allocated to Common Stock	80800	=101000*88000/110000
	Allocated to Preferred Stock	20200	=101000*22000/110000