Question

Testbank Multiple Choice Question 73 Sheffield Corp. issued 10200 shares of its $5 par value common stock having a fair value of $25 per share and 14000 shares of its $10 par value preferred stock having a fair value of $25 per share for a lump sum of $529000. How much of the proceeds would be allocated to the common stock

Answer 1

Answer:

$222,967

Explanation:

Calculation of How much of the proceeds would be allocated to the common stock

First step

[(10,200 shares× $25 per share Fair value )÷

(10,200 shares × $25 per share Fair value+14,000 shares×$25 per share Fair value)]×$529,000

Second Step

($255,000÷$255,000+$350,000)× $529,000

Third step

($255,000÷$605,000)×$529,000

Fourth step

0.421487×529,000

=$222,967

Therefore the amount of the proceeds that would be allocated to the common stock will be $222,967.