Question

Exercise 15-5 Cheyenne Inc. issues 500 shares of $10 par value common stock and 100 shares of $100 par value preferred stock for a lump sum of $105,000. (a) Prepare the journal entry for the issuance when the market price of the common shares is $172 each and market price of the preferred is $215 each. (b) Prepare the journal entry for the issuance when only the market price of the common stock is known and it is $180 per share. (Round answers to 0 decimal places, e.g. $1,225. Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter o for the amounts.) No. Account Titles and Explanation Debit Credit (a) (b)

Answer 1

	Account titles and Explanation	Debit	Credit
(a)	Cash	105000
	Common Stock		5000	=500*10
	Paid in Capital in excess of par-Common Stock		79000	=84000-5000
	Preferred Stock		10000	=100*100
	Paid in Capital in excess of par-Preferred Stock		11000	=21000-10000
(b)	Cash	105000
	Common Stock		5000	=500*10
	Paid in Capital in excess of par-Common Stock		85000	=500*(180-10)
	Preferred Stock		10000	=100*100
	Paid in Capital in excess of par-Preferred Stock		5000	=105000-5000-85000-10000
	Workings:
	(a)
	Market value of Common Stock	86000		=500*172
	Market value of Preferred Stock	21500		=100*215
	Total Market value	107500
	Amount allocated to Common Stock	84000		=105000*86000/107500
	Amount allocated to Preferred Stock	21000		=105000*21500/107500