Answer:
See explanation section
Explanation:
Requirement A
Journal entry for the issuance when the market price of the common shares is $165 each -
Debit Cash (500 shares, $165 market value) $82,500
Credit Common Stock (500 shares, $10 par value) $5,000
Credit Paid-in-capital in excess of Par/Additional paid-in-capital, Common stock (500 shares, $165 - $10 = $155 per share in excess of par) $77,500
Journal entry for the issuance when the market price of the preferred share is $230 each -
Debit Cash (100 shares, $230 market value) $23,000
Credit Preferred Stock (100 shares, $100 par value) $10,000
Credit Paid-in-capital in excess of Par/Additional paid-in-capital, Preferred stock (100 shares, $230 - $100 = $130 per share in excess of par) $13,000
Requirement B
Journal entry for the issuance when only the market price of the common stock is $170 per share -
Debit Cash (500 shares, $170 market value) $85,000
Credit Common Stock (500 shares, $10 par value) $5,000
Credit Paid-in-capital in excess of Par/Additional paid-in-capital, Common stock (500 shares, $170 - $10 = $160 per share in excess of par) $80,000
As preferred stock's market price is not given, the par value becomes the market value for the preferred stock. The journal to entry to record preferred stock -
Debit Cash (100 shares, $100 market value) $10,000
Credit Preferred Stock (100 shares, $100 par value) $10,000
