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22 August, 12:11

Mercury Corporation issued 3,500 shares of no-par common stock for $20 per share. Mercury also issued 3,200 shares of $50 par, 6 percent noncumulative preferred stock at $60 per share. Required a. Record these events in a horizontal statements model. In the Cash Flow column, indicate whether the item is an operating activity (OA), investing activity (IA), or financing activity (FA). Use NA to indicate that an element was not affected by the event.

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  1. 22 August, 13:24
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    Financing activities as all transaction related to stock of the company where they are issued in exchange of cash.

    Assets = Equity

    Cash 70,000 = Common Stock 3,500 + Additional 66,500

    Cash 192,000 = preferred 160,000 + additional 32,000

    Explanation:

    The cash received will be calcualted withe issance price

    the common stock and prefferred with the par value ($1 for common and $50 for preferred) the additional paid-in will be the difference.

    Calculations:

    First issuancce

    cash:

    3,500 x $20 = 70,000

    common stock 3,500 shares x $1 = 3,500

    additional 70,000 - 3,500 = 66,500

    Second issuancce

    cash:

    3,200 x $60 = 192,000

    preferred stock 3,200 x $50 = 160,000

    additional paid-in 192,000 - 160,000 = 32,000
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