Answer:
See the attached excel file for all the the financial statement effect.
Explanation:
Note: This question is not complete and it has some errors. The errors are therefore fixed and the complete question presented before answering the question as follows:
Share Issuances for Cash: Finlay. Inc., issued 8,000 shares of $50 par value preferred stock at $68 per share and 12,000 shares of no-par value common stock at $10 per share. The common stock has no stated value. All issuances were for cash.
a. Determine the financial statement effect of the share issuances (preferred and common).
b. Determine the financial statement effect of the issuance of the common stock assuming that it had a stated value of $5 per share.
c. Determine the financial statement effect of the issuance of the common stock assuming that it had a stated value of $1 per share.
The explanation of the answer is now given as follows:
a. Determine the financial statement effect of the share issuances (preferred and common).
Note: See the attached excel file for the the financial statement effect of the share issuances (preferred and common).
In the attached excel file, the following workings are used:
w.1: Preferred stock = Number of preferred shares issued * Preferred share par value = 8,000 * $50 = $400,000
w.2: Paid-In Capital in Excess of Par - Preferred stock = (Number of preferred shares issued * (Preferred share price per share - Preferred share par value) = 8,000 * ($68 - $50) = $144,000
w.3: Common stock = Number of common shares issued * Common stock share price per share = 12,000 * $10 = $120,000
b. Determine the financial statement effect of the issuance of the common stock assuming that it had a stated value of $5 per share.
Note: See the attached excel file for the financial statement effect of the issuance of the common stock .
In the attached excel file, the following workings are used:
w.4: Common stock = Number of common shares issued * Common share par value = 12,000 * $5 = $60,000
w.5: Paid-In Capital in Excess of Par - Common stock = (Number of common shares issued * (Common share price per share - Common share par value) = 12,000 * ($10 - $5) = $60,000
c. Determine the financial statement effect of the issuance of the common stock assuming that it had a stated value of $1 per share.
Note: See the attached excel file for the financial statement effect of the issuance of the common stock .
In the attached excel file, the following workings are used:
w.6: Common stock = Number of common shares issued * Common share par value = 12,000 * $1 = $12,000
w.9: Paid-In Capital in Excess of Par - Common stock = (Number of common shares issued * (Common share price per share - Common share par value) = 12,000 * ($10 - $1) = $108,000
