On July 1, 2021, Nall Co. issued 2,500 shares of its $10 par common stock and 5,000 shares of its $12 par preferred stock for a lump sum of $140,000. At this date Nall's common stock was selling for $18 per share and the preferred stock for $24 per share.

a. Record the journal entry for this allocation and insurance using the proportional method.

b. What would happen if you did not have fair value for preferred stock? You do not have to show a calculation but describe what you would do.