Question

Whispering Inc. issues 500 shares of $10 par value common stock and 100 shares of $100 par value preferred stock for a lump sum of $118,000.

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

Prepare the journal entry for the issuance when only the market price of the common stock is known and it is $206 per share.

Answer 1

1
	Debit	Credit
Cash	118000
Common Stock		5000	=500*10
Paid in Capital in excess of par-Common Stock		89400	=94400-5000
Preferred Stock		10000	=100*100
Paid in Capital in excess of par-Preferred Stock		13600	=23600-10000
2
	Debit	Credit
Cash	118000
Common Stock		5000	=500*10
Paid in Capital in excess of par-Common Stock		98000	=500*(206-10)
Preferred Stock		10000	=100*100
Paid in Capital in excess of par-Preferred Stock		5000
Workings for 1:
Market value of Common Stock	90000		=500*180
Market value of Preferred Stock	22500		=100*225
Total Market value	112500
Allocated to Common Stock	94400		=118000/112500*90000
Allocated to Preferred Stock	23600		=118000/112500*22500