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Intermediate Accounting: Reporting...

3rd Edition
James M. Wahlen + 2 others
ISBN: 9781337788281

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BuyFindarrow_forward

Intermediate Accounting: Reporting...

3rd Edition
James M. Wahlen + 2 others
ISBN: 9781337788281
Textbook Problem
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Violet Corporation issues 1,200 shares of $150 par value preferred stock at a price of $200 per share. It attaches a warrant to each share of stock that allows the holder to purchase one share of $20 par common stock at $50 per share. Given that the portion of the proceeds attributable to the preferred stock totals $230,303 and the portion attributable to the common stock warrants totals $9,697, what journal entry would Violet make to allocate the $240,000 ($200 × 1,200) issuance price?

To determine

Prepare a journal entry to record the allocation of issue price.

Explanation

Preferred stock: The stock that provides a fixed amount of return (dividend) to its stockholder before paying dividends to common stockholders is referred as preferred stock.

Prepare a journal entry to record the allocation of issue price:

Account title and ExplanationPost Ref.

Debit

($)

Credit

($)

Cash  $240,000 
    Preferred stock, $150 par  $180,000
    Additional paid-in-capital on     preferred stock  $50,303
 ...

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