Question

A corporation issues 50 packages of securities for $154 per package. Each package consists of three shares of $5 par common stock and one share of $50 par preferred stock.If the market values of $40 per share for the common stock and $100 per share for preferred stock are known, the journal entry to record the sale would assign a total value to the preferred stock (preferred +APIC on preferred) of A. $ 3,500 B. $ 4,200 C. $ 5,775 D. $ 6,000

Answer 1

Market value of the stocks $

Market value of common stocks (3 shares x $40) 120

Market value of preferred stock ( 1 share x $100) 100

Total market value of the stocks 220

Total value of 50 packages of securities

= 50 x $154

= $7,700

The total value of preferred stocks

= $100/$220 x $7,700

= $3,500

The correct answer is A

Step-by-step explanation:

There is need to calculate the market value of the two stocks by multiplying the units of each stock by their respective current market price. Then, we will determine the total value of the 50 packages of securities, Finally, we will determine the total value to be assigned to preferred stock, which is the market value of preferred stock divided by the total market value multiplied by the total value of 50 packages of securities.