Question

Maxville Company issues 300 shares of $50 par preferred stock and 1,000 shares of $10 par common stock in a "package" sale on December 31. Total proceeds received amount to $39,000. Required: Record the transaction for each independent assumption shown: 1. The common stock has a current market value of $19 per share; the current market value of preferred stock is not known. 2. The common stock and the preferred stock have a current market value per share of $22 and $60, respectively.

Answer 1

Solution:

Journal Entry - Maxville Company
Event	Particulars	Debit	Credit
1	Cash Dr	$39,000.00
	To Common Stock (1000*$10)		$10,000.00
	To Preferred stock (300*$50)		$15,000.00
	To Paid in capital in excess of par - Common Stock (1000*$9)		$9,000.00
	To Paid in capital in excess of par - Preferred Stock		$5,000.00
	(To record issue of common stock and preferred stock)
2	Cash Dr	$39,000.00
	To Common Stock (1000*$10)		$10,000.00
	To Preferred stock (300*$50)		$15,000.00
	To Paid in capital in excess of par - Common Stock ($22,000*$39,000/$40000 - $10,000)		$11,450.00
	To Paid in capital in excess of par - Preferred Stock ($18,000*$39,000/$40000 - $15,000)		$2,550.00
	(To record issue of common stock and preferred stock)