Question

# Monty Inc. issues 500 shares of \$10 par value common stock and 100 shares of \$100...

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. 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

enter an account title for case A

enter a debit amount

enter a credit amount

enter an account title for case A

enter a debit amount

enter a credit amount

enter an account title for case A

enter a debit amount

enter a credit amount

enter an account title for case A

enter a debit amount

enter a credit amount

(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

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

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