Question

(Lump-Sum Sales of Stock with Preferred Stock) Black Diamond Inc. issues 2,500 shares of $1 par...

(Lump-Sum Sales of Stock with Preferred Stock)

Black Diamond Inc. issues 2,500 shares of $1 par value common stock and 1,000 shares of $50 par value preferred stock for a lump sum of $275,000.

Instructions:

a) Prepare the journal entry for the issueance when the market value of the common shares is $95 each and market value of the preferred is $60 each.

b) Prepare the journal entry for the issuance when only the market value of the common stock is known and it is $90 per share.

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Answer #1
No. Account Titles and Explanation Debit Credit
a. Cash 275000
Common stock (2500 * 1 ) 2500
Preferred stock (1000 * 50 ) 50000
Additional paid in capital - Common stock 217038
Additional paid in capital - Preferred stock 5462
b. Cash 275000
Common stock ( 2500 * 1 ) 2500
Preferred stock ( 1000 * 50 ) 50000
Additional paid in capital - Common stock (2500*[90 -1]) 222500
Additional paid in capital - Preferred stock 0
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