Egghead, Inc., is a software chain with over 120 stores nationwide. Until recently, all the com¬ mon shares of the company were held by its founders and employees. Several years ago the company filed for an initial public offering of 3.6 million common shares. The shares were priced at $15 each. After the offering, Egghead had 15.6 million shares outstanding. Assume that the company holds no treasury stock. REQUIRED:

a. Assume that Egghead’s common stock has a $1 par value. Provide the journal entry to record the issuance of the new shares.

b. Assume all the shares originally outstanding were sold for $10 per share. Provide the con¬ tributed capital section of Egghead’s balance sheet both before and after the sale of the new stock.

c. Do you think that the company’s board of directors and existing shareholders had to approve the public issuance before it occurred? Why or why not?

d. Provide several reasons that may have caused the company to raise the $54 million with an equity, instead of a debt, issuance.