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Coronado Corporation issued 356 shares of $10 par value common stock and 148 shares of $50 par value preferred stock for a lump sum of $19,728
Coronado Corporation issued 356 shares of $10 par value common stock and 148 shares of $50 par value preferred stock for a lump sum of $19,728. The common stock has a market price of $20 per share, and the preferred stock has a market price of $100 per share.
Prepare the journal entry to record the issuance.
Expert Solution
The lump sum amount received in the issuance of shares is allocated using the fair value of the shares as follows:
| Common shares (356 shares @ $20) | 7,120 |
| Preffered shares (148 shares @ $100) | 14,800 |
| Total | 21,920 |
| Allocation to common shares ($19,728 * 7,120 / 21,920) | 6,408 |
| Allocation to preffered shares ($19,728 * 21,920 / 21,920) | 13,320 |
Journal entry to record the issuance is as follows:
| Account | Debit | Credit |
|---|---|---|
| Cash | $19,728 | |
| Common stock (356 @ $10) | $3,560 | |
| Paid-in-capital - Common ($6,408 - $3,560) | $2,848 | |
| Preffered stock (148 @ $50) | $7,400 | |
| Paid-in-capital - Preferred ($13,320 - $7,400) | $5,920 |
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