Question

Mercury Corporation issued 3,500 shares of no-par common stock for $20 per share. Mercury also issued 3,200 shares of $50 par, 6 percent noncumulative preferred stock at $60 per share. Required a. Record these events in a horizontal statements model. In the Cash Flow column, indicate whether the item is an operating activity (OA), investing activity (IA), or financing activity (FA). Use NA to indicate that an element was not affected by the event.

Answer 1

Answer:

Financing activities as all transaction related to stock of the company where they are issued in exchange of cash.

Assets             =    Equity

Cash 70,000  =     Common Stock 3,500 + Additional 66,500

Cash  192,000 =  preferred 160,000 + additional 32,000

Explanation:

The cash received will be calcualted withe issance price

the common stock and prefferred with the par value ($1 for common and $50 for preferred) the additional paid-in will be the difference.

Calculations:

First issuancce

cash:

3,500 x $20 = 70,000

common stock 3,500 shares x $1 = 3,500

additional 70,000 - 3,500 = 66,500

Second issuancce

cash:

3,200 x $60 = 192,000

preferred stock 3,200 x $50 = 160,000

additional paid-in 192,000 - 160,000 = 32,000