Question

Nash Inc. issues 500 shares of $10 par value common stock and 100 shares of $100 par value preferred stock for a lump sum of $110,000.

(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 $190 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	Credit
(a)	enter an account title for case A	enter a debit amount	enter a credit amount
	enter an account title for case A	enter a debit amount	enter a credit amount
	enter an account title for case A	enter a debit amount	enter a credit amount
	enter an account title for case A	enter a debit amount	enter a credit amount
	enter an account title for case A	enter a debit amount	enter a credit amount
(b)	enter an account title for case B	enter a debit amount	enter a credit amount
	enter an account title for case B	enter a debit amount	enter a credit amount
	enter an account title for case B	enter a debit amount	enter a credit amount
	enter an account title for case B	enter a debit amount	enter a credit amount
	enter an account title for case B	enter a debit amount	enter a credit amount

Answer 1

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a)
Fair value of common = 500*180	90,000.00
Fair value of Preferred = 100*225	22,500.00
	112,500.00
Allocated to common = 90,000/112,500*110,000	88,000.00
Allocated to Preferred = 22,500/112,500*110,000	22,000.00
Total Allocation	110,000.00
	Debit	Credit
Cash Dr	110,000.00
To Common Stock=500*10		5,000.00
To Paid-in Capital in Excess of Par - Common Stock = 88000-5000		83,000.00
To Preferred Stock = 100*100		10,000.00
To Paid-in Capital in Excess of Par - Preferred Stock = 22000-10000		12,000.00
b)
Lumpsum Receipt	110,000.00
Allocated to Common = 500*190	95,000.00
Balance allocated to preferred	15,000.00
	Debit	Credit
Cash Dr	110,000.00
To Common Stock=500*10		5,000.00
To Paid-in Capital in Excess of Par - Common Stock = 95000-5000		90,000.00
To Preferred Stock = 100*100		10,000.00
To Paid-in Capital in Excess of Par - Preferred Stock = 15000-10000		5,000.00