Final answer:
The combined market value of both common and preferred stock is used to determine their proportional shares of the lump sum proceeds. After calculating, approximately $10,909 should be allocated to common stock and $13,091 to preferred stock. However, these values do not match the provided options, suggesting a possible typo in the question or an error in calculation.
Step-by-step explanation:
To allocate the proceeds between common and preferred stock when issued for a lump sum, we first need to determine the proportional market value of each type of stock. The total market value of the common stock is calculated by multiplying the number of common shares by their market value: 500 shares × $25 = $12,500. For the preferred stock: 750 shares × $20 = $15,000. The combined market value is $12,500 + $15,000 = $27,500. To find the allocation, we divide the market value of each type of stock by the combined market value and then apply the respective proportion to the total proceeds of $24,000.
For common stock: ($12,500 / $27,500) × $24,000 ≈ $10,909.09
For preferred stock: ($15,000 / $27,500) × $24,000 ≈ $13,090.91
Thus, the proceeds would be allocated approximately $10,909 to common stock and $13,091 to preferred stock, which is not an exact option listed; therefore, either the question has a typo in the options provided, or there has been an error in calculating the proceeds. We may need to round to the nearest whole number: $10,909 for common and $13,091 for preferred, but again, these are not matching the provided options.