Question

Exercise 15-05

Waterway Inc. issues 500 shares of $10 par value common stock and 100 shares of $100 par value preferred stock for a lump sum of $114,000.

(a) Prepare the journal entry for the issuance when the market price of the common shares is $176 each and market price of the preferred is $220 each.
(b) Prepare the journal entry for the issuance when only the market price of the common stock is known and it is $198 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 0 for the amounts.)

No. Account Titles and Explanation Debit Credit (a) Cash Common Stock Paid-in Capital in Excess of Preferred Stock Paid-in Ca

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Answer #1

| A 1 a) Fair Value of Common (500 X $176) Fair Value of Preferred (100 X $220) $88,000 $22,000 $110,000 Allocated to Common:Lump-sum receipt Allocated to common (500 X $198) Balance allocated to preferred $114,000 $99,000 $15,000 22 Date Credit ($)

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