Walt’s Antique Cars Inc. issued equity securities. The offering included 100,000 bundles of one no par value common share and one no par value preferred share. Each bundle sold for $50. Walt’s has adopted a policy of charging share issuance costs to retained earnings.

Required:

a. Assume that the fair values of the common shares and preferred shares are $42 and $10, respectively. Prepare the journal entry for the issuance of the equity securities using the relative fair value (proportional) method.

b. Assume that the fair value of the common shares is $42 each but the value of the preferred shares is not known. Prepare the journal entry for the issuance of the equity securities.

c. How would your answer to part (a) change if Walt’s incurred $20,000 of costs directly related to the issuance of the securities? Prepare the journal entry.