Blossom Inc. issues 500 shares of $10 par value common stock and 100 shares of $
ID: 2539244 • Letter: B
Question
Blossom Inc. issues 500 shares of $10 par value common stock and 100 shares of $100 par value preferred stock for a lump sum of $118,000. (a) Prepare the journal entry for the issuance when the market price of the common shares is $180 each and market price of the preferred is $225 each (b) Prepare the journal entry for the issuance when only the market price of the common stock is known and it is $206 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 CreditExplanation / Answer
Answer to Part 1:
Fair Value of Common Stock (500*180)
90000
Fair Value of Preferred Stock (100*225)
22500
Total
112500
Allocated to Common Stock (118000*90000/112500)
94400
Allocated to Preferred Stock (118000*22500/112500)
23600
Total Allocation
118000
No
Accounts title and explanation
Debit
Credit
(a)
Cash
118000
Common Stock (500*10)
5000
Paid in capital in excess of Par - Common Stock (94400-5000)
89400
Preferred Stock (100*100)
10000
Paid in capital in excess of Par - Preferred Stock (23600-10000)
13600
Answer to part 2:
Lumpsum Amount
118000
Allocated to Common Stock (500*206)
103000
Balance allocated to Preferred stock (118000-103000)
15000
No
Accounts title and explanation
Debit
Credit
(b)
Cash
118000
Common Stock (500*10)
5000
Paid in capital in excess of Par - Common Stock (103000-5000)
98000
Preferred Stock (100*100)
10000
Paid in capital in excess of Par - Preferred Stock (15000-10000)
5000
Fair Value of Common Stock (500*180)
90000
Fair Value of Preferred Stock (100*225)
22500
Total
112500
Allocated to Common Stock (118000*90000/112500)
94400
Allocated to Preferred Stock (118000*22500/112500)
23600
Total Allocation
118000