Answer:
The journal entry to record the preferred stock, additional paid in capital on preferred stock and the warrants would be as under:
Dr Cash Account $240,000
Cr Preferred Stock $180,000
Cr Additional Paid In Capital $50,303
Cr Common Stock Warrants $9,697
The journal entry recording of warrant value would be:
Dr Cash Account $60,000
Dr Common Stock Warrants $9,697
Cr Common Stock $24,000
Cr Additional Paid In Capital $45,697
Step-by-step explanation:
The Preferred stock par value collection is calculated as under:
Preferred Stock = $150 Par value * 1,200 per share = $180,000
The additional paid in capital on preferred stock can be calculated by taking the difference between the amount received $230,303 and the par value of 1200 shares.
Additional Paid In Capital on Preferred Stock = $230,303 - $180,000
Additional Paid In Capital on Preferred Stock = $50,303
The journal entry to record the preferred stock, additional paid in capital on preferred stock and the warrants would be as under:
Dr Cash Account $240,000
Cr Preferred Stock $180,000
Cr Additional Paid In Capital $50,303
Cr Common Stock Warrants $9,697
Now we will come to warrant's accounting treatment.
First of all, we will find common stock value which is as under:
Common stock = 1200 shares * $20 = $24,000
The additional Paid in Capital for common stock is as under:
Additional Paid in Capital for Common Stock = 1200 * $50 - $24,000 + 9,697 = $36,000
And the total cash received is $60,000 ($50 * 1200 shares) for warrants.
The journal entry recording of warrant value would be:
Dr Cash Account $60,000
Dr Common Stock Warrants $9,697
Cr Common Stock $24,000
Cr Additional Paid In Capital $45,697