Question

Duszynski Company issues 20,000 shares of its $.50 par value common stock having a market value of $25 per share and 6,000 shares of its $25 par value preferred stock having a market value of $50 per share for a lump sum of $750,000. The proceeds allocated to the common stock is?

Answer 1

Answer:

The proceeds allocated to common stock = 20,000 x  $25 =$500,000

Explanation:

The proceeds allocated to common stock = 20,000 x  $25 =$500,000

Here, common stock was sold at premium above the par value, hence following entries applied :

CR Common Stock  $10,000 (20,000 x $.50)

CR Common stock premium Account $490,000 ( $500,000 - $10,000 )

DR Cash/ Bank Account $500,000.