Question

25. Cinnamon Company issues 4,000 shares of its $1 par common stock having a market value of $17 per share and 2,000 shares of its $2 par preferred stock for a lump sum of $170,000. What amount of the proceeds should be allocated to the paid-in capital account for preferred stock?

A) $102,000

B) $98,000

C) $68,000

D) $34,000

Answer 1

A) $102,000

Lump sum amount received					$       1,70,000
Paid in Capital for common stock					$           68,000
(4000*$17)
Paid in Capital for preferred stock					$       1,02,000
Amount received from issuance of preferred stock is known as paid in capital.
Amount received in excess of Par is known as additional paid in capital in excess of Par.