Problem 11 Irish, Inc. issues 1,000 shares of $100 par, 10% preferred stock with detachable warrants....

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Problem 11 Irish, Inc. issues 1,000 shares of $100 par, 10% preferred stock with detachable warrants. The package of one shar

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Answer 1

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Journal Entry at the time of Issuance
Particulars	Debit	Credit
Cash A/c Dr.	110000
Discount on Issue of Preferred Stock	1000
To Preferred Stock		100000
To Common Stock Warrant		11000

Journal Entry on Option Exercised 60%
Cash A/c Dr.	120000
Common Stock Warrant A/c Dr.	6600
To Common Stock		126600

Journal Entry for Option Lapsed 40%
Common Stock Warrant A/c Dr.	4400
To Paid in Capital From Stock Warrant Expired		4400

Market Value of Preferred Stock	108000
(1000*108)
Market Value of Warrant	12000
(1000*12)
Total Market Value	120000
Issuance Value	110000
(1000*110)
Allocation to Preferred Stock	99000
[110000*(108000/120000)]
Allocation to Warrants	11000
[110000*(12000/120000)]

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