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 of

Answer 1

Answer: $3500

Step-by-step explanation:

Hi,, to answer this, first, we have to multiply the 50 packages by the cost per package (154).

50x 154 = $7700

Now to calculate the market value of the stocks we have to multiply the quantity of each share by its market value, and then add both results.

Common stocks: 3 x $40 = $120

Preferred stock: 1 x $100 = $100

Total market value: 120+100= $220

Now the value of the preferred stock assigned to the packages will be:

Total value of 50 packages x (market value preferred stock / total market value) =

7700 x (100/220) = $3500

Answer 2

$3500

Step-by-step explanation:

Firstly, we calculate the market value of both stocks by multiplying their units by prices and adding it up to get the total value.

From the question we have,

Market value of common stocks

= 3 shares × $40.

= 120

Market value of preferred stocks

= 1 share × $ 100

= 100

Thus, total market value of stocks

= preferred + common

= 100 + 120

= 220.

Also, we determined to total value of the 50 packages of securities.

Total value of 50 packages of securities

= 50 × 154

= $7,700

Thus,

Total value of preferred stocks

= preferred stock/total stock × total value of package of securities.

Finally Therefore,

Total value of preferred stock

= 100/220 × 7700

= 0.4545454545 × 7700

= $3500