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On March 1, 20X5, Rya Corp. issued 1,000 shares of its $20 par value common stock and 2,000 shares of its $20 par value convertible preferred stock for a total of $80,000.At this date, Rya's common stock was selling for $36 per share, and the convertible preferred stock was selling for $27 per share.What amount of the proceeds should be allocated to Rya's convertible preferred stock?

Question

On March 1, 20X5, Rya Corp. issued 1,000 shares of its $20 par value common stock and 2,000 shares of its $20 par value convertible preferred stock for a total of $80,000.
At this date, Rya's common stock was selling for $36 per share, and the convertible preferred stock was selling for $27 per share.
What amount of the proceeds should be allocated to Rya's convertible preferred stock?

 

check_circleAnswer
Step 1

Step 1: Compute the total market value.

Calculation Amount
Particulars
Market value of common stock |(1,000x$36)
Market value of preferred stock (2,000x$27)
|Total market value
$36,000
$54,000
$90,000
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Calculation Amount Particulars Market value of common stock |(1,000x$36) Market value of preferred stock (2,000x$27) |Total market value $36,000 $54,000 $90,000

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Step 2

Step 2: Compute the amount of proceeds that should be all...

Market value of preferred stock
<(Total amount)
Allocati on of proceeds to preferred
Total market value
$54.000
-x$80,000
$90.000
= $48,000
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Market value of preferred stock <(Total amount) Allocati on of proceeds to preferred Total market value $54.000 -x$80,000 $90.000 = $48,000

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