Question 1

In the financial statements organization costs appears

Accepted Answer

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

Question 2

The following data is available for Santos Service Corporation at December 31 2017: Common stock, par $ \$ 10 $ (authorized 100,000 shares) $\quad $ $ \$ 400,000 $
 Treasury Stock (at cost $ \$ 15 $ per share) $\quad $ $\quad $  $\quad $ $\quad $ $\quad $$\$27,000$
 Based on the data how many shares of common stock have been issued?

Accepted Answer

The number of shares issued is calculated by dividing the total common stock value by the par value per share. Thus, $ \$400,000 \div \$10 = 40,000 $ shares.

Question 3

Abbie's Organics Corporation began business in 2017 by issuing 50000 shares of $3 par common stock for $8 per share and 20000 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 2017 balance sheet Carson Packaging would report

Accepted Answer

The common stock is calculated as the number of shares issued multiplied by the par value per share. Therefore, 50,000 shares * $3 par value = $150,000.

Question 4

A corporation purchases 40000 shares of its own $15 par common stock for $30 per share recording it at cost. What will be the effect on total stockholders' equity?

Accepted Answer

When a corporation buys back its own shares, it reduces stockholders' equity by the cost of the shares purchased. In this case, 40,000 shares at $30 each equals $1,200,000, thus decreasing stockholders' equity by that amount.

Question 5

Red October Company has 2000 shares of 6% $100 par cumulative preferred stock outstanding at December 31 2016. No dividends have been paid on this stock for 2016 or 2017. Dividends in arrears at December 31 2017 total

Accepted Answer

Cumulative preferred stock means that any unpaid dividends accumulate and must be paid before any common stock dividends can be paid. Therefore, by the end of 2017, there are 2 years' worth of unpaid dividends, totaling $12,000 (2 years x 2000 shares x $100 par value x 6% dividend rate = $12,000).

Question 6

The following data is available for Santos Service Corporation at December 31 2017: Common stock, par $ \$ 10 $ (authorized 100,000 shares) $\quad $ $ \$ 400,000 $
 Treasury Stock (at cost $ \$ 15 $ per share) $\quad $ $\quad $  $\quad $ $\quad $ $\quad $$\$27,000$
 Based on the data how many shares of common stock are outstanding?

Accepted Answer

The company has issued 40,000 shares of common stock (\$400,000 / \$10 par value). The treasury stock represents 1,800 shares (\$27,000 / \$15 per share). Therefore, the outstanding shares are 40,000 - 1,800 = 38,200.

Question 7

East Asian Imports Inc. issued 15000 shares of stock at a stated value of $8 per 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 East Asian Imports Inc. issued 15000 shares...

Question 8

Kagan Corporation was organized on January 2 2017. During 2017 Kagan issued 40000 shares at $24 per share purchased 6000 shares of treasury stock at $26 per share and had net income of $600000. What is the total amount of stockholders' equity at December 31 2017?

Accepted Answer

The total amount of stockholders' equity at December 31, 2017, can be calculated as follows:- Issued shares: 40,000 shares at $24 per share = $960,000- Treasury stock purchased: 6,000 shares at $26 per share = $156,000. This amount reduces stockholders' equity.- Net income for 2017: $600,000, which increases stockholders' equity.Therefore, the total stockholders' equity at the end of 2017 is:$960,000 (from issued shares) + $600,000 (net income) - $156,000 (treasury stock) = $1,404,000.

Question 9

Sunshine Company issued 4000 shares of its $5 par value common stock in payment of its attorney's bill of $80000. The bill was for services performed in helping the company incorporate. Crain should record this transaction by debiting

Accepted Answer

When a company incurs expenses related to organizing, such as legal fees for incorporating, those expenses are classified as organization expenses. Therefore, the transaction should be recorded by debiting Organization Expense for $80,000.

Question 10

Conecuh Manufacturing Corporation purchased 8000 shares of its own previously issued $10 par common stock for $184000. As a result of this event

Accepted Answer

When a company buys back its own shares, it reduces its total stockholders' equity by the amount paid for those shares. In this case, Conecuh Manufacturing Corporation's total stockholders' equity decreased by $184,000, the amount paid to repurchase the shares. The Common Stock account and the Paid-in Capital in Excess of Par account are not directly affected by the repurchase itself; these accounts reflect the initial issuance of shares, not their repurchase.

Question 11

Jackson Company is a publicly held corporation whose $1 par value stock is actively traded at $64 per share. The company issued 3000 shares of stock to acquire land recently advertised at $200000. When recording this transaction Barton Company will

Accepted Answer

When a company issues stock for non-cash assets such as land, the transaction records the asset acquired, not the price advertised. Therefore, Jackson Company will debit Land for $200,000, and credit Common Stock for the fair market value of the stock issued, which is 3000 x $64 = $192,000. The difference between the Land value and the Common Stock value is recorded as a debit or credit to Additional Paid-In Capital, but none of the choices in the question reflect this option. Choice C is the correct answer because it correctly records the asset acquired.

Question 12

Kaenzig Coffee Company issued 1000 shares of no-par common stock for $11000. Which of the following journal entries would be made if the stock has a stated value of $2 per share? a.
$\begin{array}{llr}
  \text {Cash  } &11,000\
 \text {  Common Stock} &&11,000\
\end{array}$

b. 
$\begin{array}{llr}
  \text { Cash } &11,000\
 \text {  Common Stock} &&2,000\
 \text {  Paid-in Capital in Excess of Par} &&9,000
\end{array}$

c. 
$\begin{array}{llr}
  \text {Cash  } &11,000\
 \text { Common Stock } &2,000\
 \text { Paid-in Capital in Excess of Stated Value } &9,000
\end{array}$

d.
$\begin{array}{llr}
  \text {  Common Stock} &11,000\
 \text {  Cash} &&11,000\
\end{array}$

Accepted Answer

The answer of Kaenzig Coffee Company issued 1000 shares of...

Question 13

Hayes Construction Company issued 1200 shares of no-par common stock for $17600. Which of the following journal entries would be made if the stock has no stated value? a. 
$\begin{array}{llr}
  \text { Cash } &17,600\
 \text {  Common Stock} &&17,600\
\end{array}$

b.
$\begin{array}{llr}
  \text { Cash } &17,600\
 \text {Common Stock  } &&1,200\
 \text { Paid-in Capital in Excess of Par } &&16,400
\end{array}$

c. 
$\begin{array}{llr}
  \text {Cash  } &17,600\
 \text {  Common Stock} &&1,200\
 \text { Paid-in Capital in Excess of Stated Value } &&16,400
\end{array}$

d. 
$\begin{array}{llr}
  \text {  Common Stock} 17,600&\
 \text {  Cash} &&17,600\
\end{array}$

Accepted Answer

The answer of Hayes Construction Company issued 1200 shares of...

Question 14

Bodkin Beverage Company is authorized to issue 20000 shares of 8% $100 par value preferred stock and 500000 shares of no-par common stock with a stated value of $1 per share. If Bodkin issues 12000 shares of common stock to pay its recent attorney's bill of $50000 for legal services on a land access dispute which of the following would be the journal entry for Bodkin to record? a. 
$\begin{array}{llr}
  \text {Legal Expense  } &12,000\
 \text {  Common Stock} &&12,000\
\end{array}$

b.
$\begin{array}{llr}
  \text {Legal Expense  } &50,000\
 \text { Common Stock } &&50,000\
 \text {  } &
\end{array}$

c.
$\begin{array}{llr}
  \text { Legal Expense } &50,000\
 \text {  Common Stock} &&12,000\
 \text { Paid-in Capital in Excess of Stated Value -Common } &&38,000
\end{array}$

d. 
$\begin{array}{llr}
  \text { Legal Expense } &50,000\
 \text { Common Stock } &&12,000\
 \text { Paid-in Capital in Excess of Par - Preferred } &&38,000
\end{array}$

Accepted Answer

The answer of Bodkin Beverage Company is authorized to issue...

Question 15

H. Tillman performed legal services for J. Laney. Due to a cash shortage an agreement was reached whereby J. Laney. would pay H. Tillman a legal fee of approximately $4000 by issuing 1000 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 J. Laney. to record this transaction is: a. 
$\begin{array}{llr}
  \text {  Legal Expense} &4,500\
 \text {Common Stock  } &&4,500\
\end{array}$

b.
$\begin{array}{llr}
  \text {Legal Expense  } &4,000\
 \text { Common Stock } &&4,000\
\end{array}$

c.
$\begin{array}{llr}
  \text {  Legal Expense} &4,000\
 \text {Common Stock  } &&1,000\
 \text { Paid-in Capital in Excess of Par - Common } &&3,000
\end{array}$

d. 
$\begin{array}{llr}
  \text {Legal Expense } &4,500\
 \text { Common Stock } &&1,000\
 \text {Paid-in Capital in Excess of $ \mathrm{Par} $ - Common  } &&3,500
\end{array}$

Accepted Answer

The answer of H. Tillman performed legal services for J....

Question 16

Delta Corp. issues 4000 shares of $10 par value common stock at $14 per share. When the transaction is recorded credits are made to

Accepted Answer

The par value of the shares is $10 per share, so the total par value of the 4000 shares is $40000 (4000 shares x $10 per share). Because the shares were sold for $14 per share, the company received $56000 (4000 shares x $14 per share). The difference between the par value and the issue price is $4 per share, so the total amount of paid-in capital in excess of par value is $16000 (4000 shares x $4 per share). Therefore, the correct journal entry would be to credit Common Stock for $40000 and to credit Paid-in Capital in Excess of Par for $16000, for a total credit of $56000.

Question 17

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 18

If Merril Company issues 9000 shares of $5 par value common stock for $160000 the account

Accepted Answer

The Common Stock account is credited for the par value of the shares issued, which is 9000 shares x $5 par value = $45000.

Question 19

Cherokee Inc. paid $180000 to buy back 20000 shares of its $1 par value common stock. This stock was sold later at a selling price of $6 per share. The entry to record the sale includes a

Accepted Answer

The answer of Cherokee Inc. paid $180000 to buy back...

Question 20

A corporation purchases 60000 shares of its own $30 par common stock for $45 per share recording it at cost. What will be the effect on total stockholders' equity?

Accepted Answer

When a corporation purchases its own stock, it is known as treasury stock. This reduces the number of outstanding shares, but does not change the total amount of stockholders' equity. However, treasury stock is recorded at cost, which in this case is $45 per share. Therefore, the corporation's assets decrease by $2,700,000 (60,000 shares x $45 per share) and so does the stockholders' equity since assets decrease by the same amount as the treasury stock purchase. Therefore, the correct answer is C.

Quiz 13: Corporations: Organization and Capital Stock Transactions