Ravonette Corporation issued 300 shares of $10 par value common stock and 100 shares of $50 par value preferred stock for a lump sum of $13,500.
1) The common stock has a market value of $20 per share, and the preferred stock has a market value of $90 per share.
2) The common stock has a market value of $20 per share, and the value of preferred stock is unknown.
Prepare the journal entry to record the issuance. (Round answers to 0 decimal places, e.g., 1520. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.)
Account Titles and Explanation Debit Credit

Answer:

A. Dr Cash $13,500

Cr Preferred Stock $5,000

Cr Common Stock $3,000

Cr PICEP-preferred 3,100

Cr PICEP-Common 2,400

B. Dr Cash 13,500

Cr Common Stock 3,000

Cr PICEP-(c/s) 3,000

Cr Preferred stock 5,000

Cr PICEP (p/s) 2,500

Explanation:

Preparation of the journal entry to record the issuance

Dr Cash $13,500

Cr Preferred Stock $5,000

(100 shares * $50)

Cr Common Stock $3,000

(300 shares * $10)

Cr PICEP-preferred 3,100

($8,100-$5,000)

Cr PICEP-Common 2,400

($5,400-$3,000)

Preferred share$90*100) $9000

Common stock($20*300) $6000

Total $15,000

$9000/$15000*$13500

=$8,100

$6000/$15000*$13,500

=$5,400

B.

Cash 13,500

Common Stock 3,000

(300 shares * $10)

PICEP-(c/s) 3,000

(300 shares * $10)

Preferred stock 5,000

(100 shares * $50)

PICEP (p/s) 2,500

[13,500-($20*300)]-$5,000

= $7,500-$5,000

=$2,500

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