Exercise 15-5 Shamrock Inc. issues 500 shares of $10 par value common stock and

Question

Exercise 15-5

Shamrock 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.

(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

Open Show Work

(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.

Explanation / Answer

Total allocation

1 FMV of Common stock (500 * $180) 90000 FMV of Preferred (100 *225) 22500 Total 112500 Allocated to Common stock (90000/112500)*118000 94400 Allocated to Preferred: (22500/112500)*118000 23600

Total allocation

118000 General Journal   Debit Credit 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

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