Parker Corporation has issued 2,000 shares of common stock and 400 shares of pre
ID: 2349704 • Letter: P
Question
Parker Corporation has issued 2,000 shares of common stock and 400 shares of preferred stock for a lump sum of $72,000 cash.Instructions:
(a) Give the entry for the issuance, assuming the par value of the common was $5 and the market value $30, and the par value of the preferred was $40 and the market value $50. (Each valuation is on a per-share basis and there are ready markets for each stock.)
(b) Give the entry for the issuance assuming the same facts as (a) above except the preferred stock has no ready market value, and the common stock has a market value of $25 per share.
Explanation / Answer
(a) Cash......................................................72,000
Common Stock .............................................10,000
Paid-in Capital in Excess of Par—Common..............44,000
Preferred Stock ............................................16,000
Paid-in Capital in Excess of Par—Preferred .............2,000
Common $30 × 2,000 $60,000
Preferred $50 × 400 20,000
$80,000 market value
60/80 × $72,000 = $54,000 common
20/80 × $72,000 = 18,000 preferred
$72,000
b)
(b) Cash...............................................72,000
Common Stock..........................................10,000
Paid-in Capital in Excess of Par—Common...........40,000
Preferred Stock.........................................16,000
Paid-in Capital in Excess of Par—Preferred..........6,000