Question

Grigoryan Company issued 10,000 shares of its $5 par value common stock having a fair value of $25 per share and 15,000 shares of its $15 par value preferred stock having a fair value of $20 per share for a lump sum of $520,000. How much of the proceeds would be allocated to paid in capital from preferred stock

Answer 1

The amount of the proceeds would be allocated to paid in capital from preferred stock is $283,636.36.

Step-by-step explanation:

Fair value of common stock = Common stock fair value per share * Number of common shares issued = $25 * 10,000 = $250,000

Fair value of preferred stock = Preferred stock fair value per share * Number of preferred shares issued = $20 * 15,000 = $300,000

Total fair value = Fair value of common stock + Fair value of preferred stock = $250,000 + $300,000 = $550,000

Amount allocated to preferred stock = (Fair value of preferred stock / Total fair value) * Lump sum proceeds = ($300,000 / $550,000) * $520,000 = $283,636.36

Therefore, the amount of the proceeds would be allocated to paid in capital from preferred stock is $283,636.36.