Monty Inc. issues 500 shares of $10 par value common stock and
100 shares of $100 par value preferred stock for a lump sum of
$103,000.
| (a) | Prepare the journal entry for the issuance when the market price of the common shares is $164 each and market price of the preferred is $205 each. | |
|---|---|---|
| (b) |
Prepare the journal entry for the issuance when only the market price of the common stock is known and it is $176 per share. |
|
No. |
Account Titles and Explanation |
Debit |
Credit |
|---|---|---|---|
|
(a) |
enter an account title for case A |
enter a debit amount |
enter a credit amount |
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enter an account title for case A |
enter a debit amount |
enter a credit amount |
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|
enter an account title for case A |
enter a debit amount |
enter a credit amount |
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|
enter an account title for case A |
enter a debit amount |
enter a credit amount |
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|
enter an account title for case A |
enter a debit amount |
enter a credit amount |
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(b) |
enter an account title for case B |
enter a debit amount |
enter a credit amount |
|
enter an account title for case B |
enter a debit amount |
enter a credit amount |
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|
enter an account title for case B |
enter a debit amount |
enter a credit amount |
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|
enter an account title for case B |
enter a debit amount |
enter a credit amount |
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|
enter an account title for case B |
enter a debit amount |
enter a credit amount |
Journal entry
|
No. |
Account Titles and Explanation |
Debit |
Credit |
|---|---|---|---|
|
(a) |
Cash | 103000 | |
| Common stock (500*10) | 5000 | ||
| Paid in capital in excess of par value-Common Stock (82400-5000) | 77400 | ||
| Preferred stock (100*100) | 10000 | ||
| Paid in capital in excess of par value-Preferred stock (20600-10000) | 10600 | ||
|
(b) |
Cash | 103000 | |
| Common Stock | 5000 | ||
| Paid in capital in excess of par value-Common Stock (166*500) | 83000 | ||
| Preferred stock | 10000 | ||
| Paid in capital in excess of par value-Preferred Stock | 5000 |
Market value of common stock = 500*164 = 82000
Market value of preferred stock = 100*205 = 20500
Value allocated to Common stock = 103000*82000/102500 = 82400
Value allocated to preferred stock = 103000*20500/102500 = 20600
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