Manning Company issued 10,000 shares of its $5 par value ordinary shares having a fair value of $25 per share and 15,000 shares of its $15 par value preference shares having a fair value of $20 per share for a lump sum of $480,000.How much of the proceeds would be allocated to the ordinary shares?

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Quizplus · Accepted Answer

The allocation is based on the relative fair values of the shares. The total fair value is (10,000 shares * $25) + (15,000 shares * $20) = $250,000 + $300,000 = $550,000. The allocation for ordinary shares is ($250,000 / $550,000) * $480,000 = $218,182.

Manning Company Issued 10,000 Shares of Its $5 Par Value