Question

Ravonette Corporation issued 550 shares of $5 par value common stock and 300 shares of $15 par value preferred stock for a lump sum of $18,000. The common stock has a market price of $25 per share, and the preferred stock has a market price of $70 per share. Determine the amount the issuance that should go to each stock (common and preferred).

Answer 1

Common stock issue price = 550 shares $5 par value

Common stock issue price = $2.750

Preferred stock issue price = $18,000

Par value of preferred stock = 300 shares * $15

Par value of preferred stock = $4,500

Paid in excess of par value of preferred stock = $18,000 - $4500

Paid in excess of par value of preferred stock = $13,500