Coronado Industries Stock Issuance Transaction

How much of the proceeds would be allocated to the common stock?

Coronado Industries issued 10800 shares of its $5 par value common stock having a fair value of $30 per share and 15300 shares of its $15 par value preferred stock having a fair value of $20 per share for a lump sum of $511000.

Answer

The answer is $262800 are allocated to common stock.

Coronado Industries allocated $262800 of the proceeds to the common stock issued in the transaction. This allocation was determined based on the fair value of the common stock and preferred stock.

The total value of the stocks issued in the transaction was calculated by multiplying the number of shares by their respective fair values:

Total Value = (10800 shares * $30) + (15300 shares * $20) = $630000

Out of this total value, a percentage of the proceeds was allocated to the common stock. The calculation for the allocation to common stock is as follows:

(10800 shares * $30 / $630000) * $511000 = $262800

The fair value of the stocks was used in the calculation because it represents the market price of the shares at the time of issuance. The par value, on the other hand, is just the face value assigned by the issuing entity.

By utilizing the fair value, Coronado Industries ensured that the allocation of proceeds accurately reflected the market conditions and values of the stocks issued.