Question

Mercury Corporation issued 10,000 shares of no-par common stock for $25 per share. Mercury also issued...

Mercury Corporation issued 10,000 shares of no-par common stock for $25 per share. Mercury also issued 4,800 shares of $30 par, 6 percent noncumulative preferred stock at $40 per share.

a. Record these events in a horizontal statements model. In the Cash Flow column, indicate whether the item is an operating activity (OA), investing activity (IA), or financing activity (FA). Use NA to indicate that an element was not affected by the event.

b. Prepare journal entries to record these transactions.

Homework Answers

Answer #1

a) Record event

Assets = Liabilities + Stockholder's equity Cash flow
Common Stock Cash 250000 Common Stock 250000 FA
Preferred stock Cash 192000 Preferred stock (4800*30) 144000 FA
Paid in capital in excess of par value-Preferred stock 48000

Journal entries

Date account and explanation debit credit
Cash 250000
Common Stock 250000
(To record Common Stock)
Cash 192000
Preferred stock 144000
  Paid in capital in excess of par value-Preferred stock 48000
(To record preferred stock)
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