Wheeler Company issued 5,000 shares of its $5 par value common stock having a fair value of $25 per share and 7,500 shares of its $15 par value preferred stock having a fair value of $20 per share for a lump sum of $260,000.

The proceeds allocated to the preferred stock is:

a. $232,917b. $162,500c. $141,818d. $118,182

Option (c) $141,818

Explanation:

Data provided in the question:

Number of common stocks issued = 5,000

Value of common stock = $25 par value

Number of preferred stocks issued = 7,500

Value of preferred stock = $20 par value

Lump sum value of total shares issued = $260,000

Now,

Fair value of the preferred stocks = 7,500 * $20

= $150,000

Fair value of the common stocks = 5,000 * $25

= $125,000

Thus,

Total value of the stocks issued = $150,000 + $125,000

= $275,000

Therefore,

Proceeds allocated to the preferred stock

= Lump sum value * [ Fair value of the preferred stocks : value of the stocks ]

= $260,000 * [ $150,000 : $275,000 ]

= $141,818.18 ≈ $141,818

Hence,

Option (c) $141,818