Reference no: EM133061408
Questions -
Q1. Monty Corporation was organized on January 1, 2020. It is authorized to issue 10,300 shares of 8%, $100 par value preferred stock, and 509,000 shares of no-par common stock with a stated value of $1 per share. The following stock transactions were completed during the first year.
Jan. 10 Issued 80,240 shares of common stock for cash at $7 per share.
Mar. 1 Issued 5,830 shares of preferred stock for cash at $111 per share.
Apr. 1 Issued 24,550 shares of common stock for land. The asking price of the land was $90,850; the fair value of the land was $80,240.
May 1 Issued 80,240 shares of common stock for cash at $9 per share.
Aug. 1 Issued 10,300 shares of common stock to attorneys in payment of their bill of $45,900 for services rendered in helping the company organize.
Sept. 1 Issued 10,300 shares of common stock for cash at $11 per share.
Nov. 1 Issued 1,100 shares of preferred stock for cash at $104 per share.
Prepare the journal entries to record the above transactions.
Q2. Windsor Corporation is a regional company which is an SEC registrant. The corporation's securities are thinly traded on NASDAQ. Windsor Corp. has issued 13,000 units. Each unit consists of a $650 par, 12% subordinated debenture and 13 shares of $7 par common stock. The units were sold to outside investors for cash at $1,144 per unit. Prior to this sale, the 2-week ask price of common stock was $52 per share. Twelve percent is a reasonable market yield for the debentures, and therefore the par value of the bonds is equal to the fair value.
Prepare the journal entry to record Windsor's transaction, under the following conditions.
(1) Employing the incremental method.
(2) Employing the proportional method, assuming the recent price quote on the common stock reflects fair value.
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