Question

Bramble Corp. has issued 2,200 shares of common stock and 440 shares of preferred stock for a lump sum of $83,000 cash. Part 1 Give the entry for the issuance assuming the par value of the common stock was $5 and the fair value $30, and the par value of the preferred stock was $40 and the fair value $50. (Each valuation is on a per share basis and there are ready markets for each stock.) (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 for the amounts.) Account Titles and Explanation Debit Credit e Textbook and Media List of Accounts Save for Later Attempts: 0 of 2 used Submit Answer

Answer 1

Common: 30 * 2,200 = 66,000 Preferred: 440 * 50 = 22,000 Market value = 66,000 + 22,000 = 88,000 Cash of 83,000 is to be apportioned between common and preference in the ratio of 66:22, i.e., 3:1. Then, Common = 62,250 Preferred = 20,750 Bramble Corp. Part Account Titles and Explanation Debit ($) Credit ($) 1 Cash 83,000 Common stock (2,200 * 5) 11,000 Paid-in capital in excess par - Common (62,250 - 11,000) 51,250 Preferred stock (440 * 40) 17,600 Paid-in capital in excess par - Preferred (20,750 - 17,600) 3,150 83,000 2 Cash Common stock (2,200 * 5) Paid-in capital in excess par - Common ([25*2,200) - 11,000) Preferred stock (440 * 40) Paid-in capital in excess par - Preferred (Balancing figure) 11,000 44,000 17,600 10,400