Question 1

A corporation has the following account balances: Common stock, $1 par value, $60,000; Paid-in Capital in Excess of Par, $1,300,000. Based on this information, the

Accepted Answer

The answer of A corporation has the following account balances:...

Question 2

If Vickers Company issues 5,000 shares of $5 par value common stock for $175,000,

Accepted Answer

The par value of the common stock is $5 per share, so the total par value of 5,000 shares is $25,000. However, the company is receiving $175,000, which is $150,000 more than the par value. This excess is credited to Paid-In Capital in Excess of Par, so the correct entry would be to credit Common Stock for $25,000 and credit Paid-In Capital in Excess of Par for $150,000. Therefore, choice C is the correct answer.

Question 3

When stock is issued for legal services, the transaction is recorded by debiting Organization Expense for the

Accepted Answer

The answer of When stock is issued for legal services,...

Question 4

The authorized stock of a corporation

Accepted Answer

The authorized stock of a corporation is the maximum number of shares that the corporation is permitted to issue, which is typically indicated in its charter.

Question 5

Paid-In Capital in Excess of Stated Value

Accepted Answer

Paid-in Capital in Excess of Stated Value represents the amount received from the sale of stock above its stated value. It is reported as part of paid-in capital on the balance sheet. Therefore, the correct option is B.

Question 6

If common stock is issued for an amount greater than par value, the excess should be credited to

Accepted Answer

When common stock is issued for an amount greater than par value, the excess amount above par value is credited to Paid-in Capital in Excess of Par. This account represents the amount that investors are willing to pay above the par value of the stock for a portion of ownership in the company. It is also known as additional paid-in capital or capital surplus.

Question 7

In the financial statements, organization costs appears

Accepted Answer

The answer of In the financial statements, organization costs appears
...

Question 8

New Corp. issues 2,000 shares of $10 par value common stock at $16 per share. When the transaction is recorded, credits are made to

Accepted Answer

The par value of the stock is $10 per share, therefore the initial credit should be to Common Stock for $20,000 (2,000 shares x $10 per share). The excess of the issue price over the par value is $6 per share ($16 - $10), which represents additional value to the corporation. This excess is credited to Paid-in Capital in Excess of Par or Stated Value for $12,000 (2,000 shares x $6 per share). Therefore, the correct entry is to credit Common Stock for $20,000 and Paid-in Capital in Excess of Par for $12,000.

Question 9

Crain Company issued 2,000 shares of its $5 par value common stock in payment of its attorney's bill of $30,000. The bill was for services performed in helping the company incorporate. Crain should record this transaction by debiting

Accepted Answer

The attorney's bill was in relation to helping the company incorporate, therefore it should be recorded as an organization expense. Since the company issued 2,000 shares of its $5 par value common stock in payment, the total value of shares issued is $10,000 (2,000 shares x $5 par value). However, the attorney's bill was for $30,000, therefore the remaining $20,000 should be recorded as organization expense. So, the journal entry would be to debit Organization Expense for $30,000 and credit Common Stock for $10,000 and Paid-in Capital in Excess of Par Value for $20,000.

Question 10

Jarrett Company issued 900 shares of no-par common stock for $13,200. Which of the following journal entries would be made if the stock has no stated value? a. 
$\begin{array}{lrl}
\text { Cash } & 13,200 & \
\text { Common Stock } && 13,200
\end{array}$
b.
$\begin{array}{lr}
\text { Cash } & 13,200 \
\text { Common Stock } && 900 \
\text { Paid-in Capital in Excess of Par } & &8,200
\end{array}$
c. 
$\begin{array}{lr}
\text { Cash } & 13,200 \
& \
\text { Common Stock } && 900 \
\text { Paid-in Capital in Excess of Stated Value } && 12,300
\end{array}$
d.
$\begin{array}{lrr}
  \text { Common Stock } &12,300\
 \text { Cash } &&13,200\
\end{array}$

Accepted Answer

The answer of Jarrett Company issued 900 shares of no-par...

Question 11

If Keene Company issues 9,000 shares of $5 par value common stock for $160,000, the account

Accepted Answer

The answer of If Keene Company issues 9,000 shares of...

Question 12

The sale of common stock below par

Accepted Answer

Selling common stock below par value is generally not permitted in most states because the par value represents a legal capital threshold that must be maintained to protect creditors.

Question 13

A separate paid-in capital account is used to record each of the following except the issuance of

Accepted Answer

A separate paid-in capital account is used to record the issuance of par value stock, stated value stock, and treasury stock above cost. No-par stock does not have a stated value or par value, so a separate paid-in capital account is not necessary. Instead, the entire proceeds from the issuance of no-par stock are recorded in the common stock account.

Question 14

Carson Packaging Corporation began business in 2015 by issuing 30,000 shares of $3 par common stock for $8 per share and 12,000 shares of 6%, $10 par preferred stock for par. At year end, the common stock had a market value of $12. On its December 31, 2015 balance sheet, Carson Packaging would report

Accepted Answer

The answer of Carson Packaging Corporation began business in 2015...

Question 15

S. Lamar performed legal services for E. Garr. Due to a cash shortage, an agreement was reached whereby E. Garr. would pay S. Lamar a legal fee of approximately $12,000 by issuing 3,000 shares of its common stock (par $1). The stock trades on a daily basis and the market price of the stock on the day the debt was settled is $4.50 per share. Given this information, the journal entry for E. Garr. to record this transaction is: a. 
$\begin{array}{lll}
\text { Legal Expense }&12,000 \
\text { Common Stock }&12,000
\end{array}$

b. 
$\begin{array}{lll}
\text { Legal Expense } & 13,500 & \
\quad \text { Common Stock } & 13,500
\end{array}$
c. 
$\begin{array}{lrl}
\text { Legal Expense } & 12,000 & \
\text { Common Stock } & & 3,000 \
\text { Paid-in Capital in Excess of Par - Common } && 9,000
\end{array}$
d.
$\begin{array}{lr}
\text { Legal Expense } & 13,500 \
\quad \text { Common Stock } & 3,000 \
\text { Paid-in Capital in Excess of Par - Common } & 10,500
\end{array}$

Accepted Answer

The answer of S. Lamar performed legal services for E....

Question 16

If stock is issued for a noncash asset, the asset should be recorded on the books of the corporation at

Accepted Answer

When stock is issued for a noncash asset, the asset should be recorded on the books of the corporation at fair value. This is because fair value represents the most accurate and reliable estimate of the value of the asset at the time of the transaction. It ensures that the financial statements reflect the true economic substance of the transaction, and allows for accurate valuation of the company's assets and equity.

Question 17

Barton Company is a publicly held corporation whose $1 par value stock is actively traded at $31 per share. The company issued 3,000 shares of stock to acquire land recently advertised at $100,000. When recording this transaction, Barton Company will

Accepted Answer

When Barton Company issues 3,000 shares of $1 par value common stock to acquire land worth $100,000, the entry to record the transaction is:

Debit Land for $100,000
Credit Common Stock for 3,000 shares x $1 par value = $3,000
Credit Paid-in Capital in Excess of Par for the remainder of the value, which is $100,000 - $3,000 = $97,000

Therefore, the correct answer is C. Barton Company should debit Land for $93,000 (the cost of the land) and credit Common Stock for $3,000 (the par value of the shares issued) and Paid-in Capital in Excess of Par for $97,000 (the difference between the cost of the land and the par value of the shares issued).

Question 18

Hsu, Inc. issued 10,000 shares of stock at a stated value of $8/share. The total issue of stock sold for $15 per share. The journal entry to record this transaction would include a

Accepted Answer

The answer of Hsu, Inc. issued 10,000 shares of stock...

Question 19

Which of the following represents the largest number of common shares?

Accepted Answer

Authorized shares represent the total number of shares a corporation is legally allowed to issue, according to its corporate charter. This number is typically larger than the number of shares actually issued to shareholders (issued shares) and the number of shares currently held by shareholders (outstanding shares). Treasury shares are shares that were issued and later repurchased by the company, reducing the number of outstanding shares but not affecting the number of authorized shares.

Question 20

If stock is issued for less than par value, the account

Accepted Answer

The answer of If stock is issued for less than...

Quiz 11: Corporations: Organization, Stock Transactions, Dividends, and Retained Earnings