Coronado Industries has issued 1,500 shares of common stock and 300 shares of preferred stock for a lump sum

Coronado Industries has issued 1,500 shares of common stock and 300 shares of preferred stock for a lump sum of $55,000 cash.

1). 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.)

2). 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 $22 per share, and the par value of the preferred stock was $40 and has no ready market.

Solutions

Expert Solution

Requirement 1:

Fair value of Common Stock = 1500*30 = 45,000

Fair value of preferred stock = 300*50 = 15,000

Total fair value = 45,000 +15,000 = $60,000

However , cash received from stock is $55,000 only.

the excess par value should be allocated based on fair value weightage ( 45:15)

No	Account and explanation	Debit	Credit
	Cash	$ 55,000
	Preferred stock (300*40)		$ 12,000
	Paid in capital in excess of par value-Preferred stock ( 55,000 x 15/60 -12,000)		$ 1,750
	Common Stock (1500*5)		$ 7,500
	Paid in capital in excess of par value-Common Stock (55000*45/60-7500)		$ 33,750

Requirement 2:

As there is no ready market for preferred stock, Any balance of excess par value after allocating to common stock should be allotted to preferred stock.

No	account and explanation	Debit	Credit
	Cash	$ 55,000
	Common Stock (1500*5)		$ 7,500
	Paid in capital in excess of par value-Common Stock (22-5)*1500		$ 25,500
	Preferred stock (300*40)		$ 12,000
	Paid in capital in excess of par value-Preferred stock		$ 10,000

Fair value of Common Stock = 1500*30 = 45,000

Fair value of preferred stock = 300*50 = 15,000

Ramesh R answered 3 years ago

Next > < Previous

Related Solutions

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...

(3) Lump sum issuance of stock Matti Corporation has issued 1,350 shares of common stock and...

(3) Lump sum issuance of stock Matti Corporation has issued 1,350 shares of common stock and 750 shares of preferred stock for a lump sum of $72,500 cash. Instructions (a) Give the entry for the issuance assuming the par value of the common stock was $5 and the fair value $25, and the par value of the preferred stock was $35 and the fair value $45. (Each valuation is on a per share basis and there are ready markets for...

Coronado Industries had 202000 shares of common stock, 19300 shares of convertible preferred stock, and $596000...

Coronado Industries had 202000 shares of common stock, 19300 shares of convertible preferred stock, and $596000 of 9% convertible bonds outstanding during 2021. The preferred stock is convertible into 39700 shares of common stock. During 2021, Coronado paid dividends of $0.55 per share on the common stock and $1.70 per share on the preferred stock. Each $1,000 bond is convertible into 45 shares of common stock. The net income for 2021 was $350000 and the income tax rate was 35%....

Coronado Industries, has 16000 shares of 4%, $100 par value, cumulative preferred stock and 61000 shares...

Coronado Industries, has 16000 shares of 4%, $100 par value, cumulative preferred stock and 61000 shares of $1 par value common stock outstanding at December 31, 2021. There were no dividends declared in 2019. The board of directors declares and pays a $108000 dividend in 2020 and in 2021. What is the amount of dividends received by the common stockholders in 2021? A $0 B $24000 C $108000 D $64000

A corporation has 1,500 shares of 10 percent, $40 par-value preferred stock and 10,000 shares of...

A corporation has 1,500 shares of 10 percent, $40 par-value preferred stock and 10,000 shares of $3 par-value common stock outstanding. If the board of the directors decides to distribute dividends totaling $38,000, the common stockholders will receive a dividend of

Preferred Stock- 5% $11 Par Value 5,500 shares authorized 4,000 shares issued and outstanding Common Stock...

Preferred Stock- 5% $11 Par Value 5,500 shares authorized 4,000 shares issued and outstanding Common Stock - $.20 Par Value 2,000,000 shares authorized, 1,650,000 shares issued and outstanding Requirement 1. Sapphire declares cash dividends of $28,000 for 2018. How much of the dividends goes to preferred? stockholders? How much goes to common? stockholders? ?(Complete all input boxes. Enter? "0" for any zero? amounts.) Sapphire dividend would be divided between preferred and common stockholders in this? manner: Total Dividend Dividend to...

Bluefield Corporation has 6 million shares of common stock outstanding, 600,000 shares of preferred stock that...

Bluefield Corporation has 6 million shares of common stock outstanding, 600,000 shares of preferred stock that pays an annual dividend of $8, and 200,000 bonds with a 10 percent coupon (semiannual interest) and 20 years to maturity. At present, the common stock is selling for $50 per share, the bonds are selling for $950.62 per $1,000 of face value, and the preferred stock is selling at $74 per share. The estimated required rate of return on the market is 13...

Pealand Company has 50,000 shares of common stock outstanding and 2,000 shares of preferred stock outstanding....

Pealand Company has 50,000 shares of common stock outstanding and 2,000 shares of preferred stock outstanding. The common stock is $1.00 par value. The preffered stock has a $100 par value, a 5% dividend rate, and is noncumulative. On October 31, 2015, the company declares dividends of $0.25 per share for common. Provide the journal entry for the declaration of dividends.

EPS calculations Southland Industries has $60,000 of 6% (annual interest) bonds outstanding, 1,500 shares of preferred...

EPS calculations Southland Industries has $60,000 of 6% (annual interest) bonds outstanding, 1,500 shares of preferred stock paying an annual dividend of $5 per share, and 4,000 shares of common stock outstanding. Assuming that the firm has a 40% tax rate, compute earnings per share (EPS) for the following levels of EBIT: A.)$24,600 B.)$30,600 C.)$35,000 Part A, EPS = $.375

(WACC) A company has common stock, preferred shares, and debt outstanding. As of today, the common...

(WACC) A company has common stock, preferred shares, and debt outstanding. As of today, the common stock is valued at $10 per share, with 2 million shares outstanding. It has a beta of 5, and market return is estimated to be 4% while treasury bills offer 1.5% risk-free rate. The preferred stock is valued at $15 per share, which pays dividend of $2 each year at a constant growth rate of 3%. Preferred stocks have 5 million shares outstanding. Finally,...

Subjects