Egghead, Inc., was a software chain that had over 100 stores across the U.S. Initially its founders and employees owned the company privately. The company eventually went public with an initial public offering (IPO) of 3.6 million shares (the company had 12 million shares prior to the IPO). The new shares were priced at \(\$ 15\) each. The company did not hold any treasury shares.

Required

a. Assume that the common shares had a \(\$ 1\) par value. Provide the journal entry to record the issuance of new shares.

b. Discuss whether you think Egghead's board of directors and existing shareholders had to approve the public issuance before it occurred.

c. Provide some reasons why Egghead wished to raise \(\$ 54\) million with equity rather than debt.