Question

Sweet Corporation issued 368 shares of $10 par value common stock and 123 shares of $50 par value preferred stock for a lump sum of $16,587. The common stock has a market price of $20 per share, and the preferred stock has a market price of $90 per share. Prepare the journal entry to record the issuance. (Round intermediate calculations to 6 decimal places, e.g. 0.546872 and final answers to 0 decimal places, e.g., 1,520. 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.)  

Answer 1

Answer:

Journal Entries:

Transaction	Account Title & Explanation	Debit	Credit
1	Cash	$16587
	Common Stock		$3680
	Paid in Capital – Common stock		$2944
	Preferred stock		$6150
	Paid in Capital – Preferred stock		$3813
	(To record issuance of share)

Explanation:

Particulars	Number of share	Market price	Fair Value	Fair value percentage
Common stock	368	$20	368 x $20 = $7360	($7360 / $18430)x100 = 39.934889%
Preferred stock	123	$90	123 x $90 = $11070	($11070 / $18430)x100 = 60.065111%
Total			$18430

Amount attributable to common stock = $16587 x 39.934889% = $6624

Par Value of Common stock = 368 share x $10 = $3680

Paid in capital Common stock = Amount attributable to common stock - Par Value of Common stock

= $6624 - $3680 = $2944.

Amount attributable to Preferred stock = $16587 x 60.065111% = $9963

Par Value of Preferred stock = 123 share x $50 = $6150

Paid in capital Preferred stock = Amount attributable to Preferred stock - Par Value of preferred stock

= $9963 - $6150 = $3813.