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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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Combined Sale of Stock Maxville Company issues 300 shares of $50 par preferred stock and 1,000 shares of $10 par common stock in a “package” sale. Total proceeds received amount to $39,000.

Required:

Record the transaction for each independent assumption shown:

  1. 1. The common stock has a current market value of $19 per share; the current market value of preferred stock is not known.
  2. 2. The common stock and the preferred stock have a current market value per share of $22 and $60, respectively.

1.

To determine

Prepare the journal entry to record the given transaction.

Explanation

Package issue of securities: When a corporation issues different kinds of securities in a package sale and allocates the proceeds among the securities based on the fair market value of respective securities. It includes common stock and preference stock.

Prepare the journal entry to record the packages issue of securities by Company M:

Account title and ExplanationPost Ref.

Debit

($)

Credit

($)

Cash  $39,000 
    Common stock , $10 par ($10×1,000shares)  $10,000
    Additional paid-in-capital ($9×1,000shares)  $9,000
  x

2.

To determine

Prepare the journal entry to record the given transaction.

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