. Parker Corporation has issued 2,000 shares of common stock and 400 shares of p
ID: 2574682 • Letter: #
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 stock was $5 and the fair value $30, and the par value of the preferred stock was $40 and the fair 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 and the common stock has a fair value of $23 per share.Explanation / Answer
General description
Debit
credit
(a)
Cash
72000
Common stock (2000*5)
10000
Paid in capital in excess of par - common (54000-10000)
44000
Preferred stock (400*$40)
16000
Paid in capital in excess of par - preferred (18000-2000)
2000
Notes:
Common stock (2000 *$30)
60000
Preferred stock ( 400*$50)
20000
Fair Value
80000
Apportionment of fair value
72000*60/80
54000
72000*20/80
18000
(b)
General description
Debit
credit
Cash
72000
Common stock (2000*5)
10000
Paid in capital in excess of par - common (2000*23)-10000
36000
Preferred stock (400*$40)
16000
Paid in capital in excess of par - preferred (Bal. fig)
10000
General description
Debit
credit
(a)
Cash
72000
Common stock (2000*5)
10000
Paid in capital in excess of par - common (54000-10000)
44000
Preferred stock (400*$40)
16000
Paid in capital in excess of par - preferred (18000-2000)
2000
Notes:
Common stock (2000 *$30)
60000
Preferred stock ( 400*$50)
20000
Fair Value
80000
Apportionment of fair value
72000*60/80
54000
72000*20/80
18000
(b)
General description
Debit
credit
Cash
72000
Common stock (2000*5)
10000
Paid in capital in excess of par - common (2000*23)-10000
36000
Preferred stock (400*$40)
16000
Paid in capital in excess of par - preferred (Bal. fig)
10000
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