Homework SourseEffect of nopar common and par preferred stock on the horizo
Effect of no-par common and par preferred stock on the horizontal statements model LO 8-4 Mercury Corporation issued 8,000 shares of no-par common stock for $20 per share. Mercury also issued 1,100 shares of $65 par, 6 percent noncumulative preferred stock at $75 per share. Required: 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.
Solution
amount of cash received from no par stock issue = 8,000*$20 =>$160,000.
from non cumulative preferred stock = 1,100*$75 =>$82,500.
Both of the events are classified as cash inflows from financing activities.
| Balance sheet | Income statement | Statement of cash flows | ||||||
| event | Assets = | Liabilities + | Shareholders equity | Revenue - | Expense | =Net Inc | ||
| issue of no par stock | $160,000 | NA | $160,000 | NA | NA | NA | 160,000 | FA |
| issue of preferred stock | $82,500 | NA | 82,500 | NA | NA | NA | 82,500 | FA |
