Question 1

A company issues no-par value with no stated value stock.Therefore,the company does not have a minimum legal capital amount.

Accepted Answer

Even if a company issues no-par value stock with no stated value, the jurisdiction in which the company is incorporated may still require a minimum amount of capital to be considered as legal capital. This legal capital requirement is meant to protect creditors by ensuring the company maintains a minimum equity base.

Question 2

Washington Corporation issued 4,000 shares of its $20 par value common stock for $23 per share.The entry to record the issuance would include a:

Accepted Answer

The entry would include a credit to Common Stock for the par value of the shares issued, which is 4,000 shares x $20 = $80,000.

Question 3

Birch Company issued 200 shares of common stock with a par value of $12 per share in exchange for equipment with a fair market value of $3,000.Record the journal entry for the stock issuance.

Accepted Answer

The answer of Birch Company issued 200 shares of common...

Question 4

Madison Corporation is authorized to issue 3,000 shares of common stock.Record the journal entry for each of the following independent situations.Assume Madison issues 750 shares at $15 on August 31.
a)Common stock has a $10 per share par value.
b)Common stock has no par value and no stated amount.
c)Common stock is no-par stock with a stated value of $8 per share.

Accepted Answer

The answer of Madison Corporation is authorized to issue 3,000...

Question 5

The Harvester Corporation issued 40 shares of $20 par value stock to its accountant.The shares are in full payment for her $900 fee for assistance in setting up the new company.The entry to record the issuance of the stock would include a:

Accepted Answer

The correct entry includes a credit to Common Stock for $800 because the par value of the stock is $20, and 40 shares were issued, resulting in a total par value of $800 (40 shares * $20 par value per share).

Question 6

The par value of stock represents the legal capital of the corporation.

Accepted Answer

The par value is the minimum amount that must be paid by the initial shareholders for their shares, and it represents the legal capital of the corporation. It is usually a nominal amount and does not necessarily reflect the actual value of the shares.

Question 7

In exchange for $1,500 legal services to help set up the new company,Hickory Grove Corporation issued 100 shares of $10 par value stock to its attorney.The entry to record the issuance of the stock would include a:

Accepted Answer

The entry would include a credit to Common Stock for the par value of the shares issued, which is 100 shares x $10 par value = $1,000.

Question 8

R.Red formed a corporation with an authorization of 20,000 shares of $50 par,6% non-cumulative preferred stock and 100,000 shares of $10 par common stock.The following selected transactions were completed during the first year of operations.Journalize the transactions omitting explanations.
$\text {Jan 10}$ $\quad $  $\text {Issued 20,000 shares of common stock at par for cash.}$
 $\quad $  $\quad $  $\quad $ $\text {31}$$\text { Issued 20,000 shares of common stock in exchange for land, buildings, and}$
 $\quad $ $\quad $ $\quad $ $\text {Equipment with fair market prices of $\$ 52,000 , \$ 125,000$, and $\$ 48,000$, respectively.}$
$\text {Feb 24}$  $\quad $$\text {Issued 2,000 shares of preferred stock at $\$ 54$ for cash.}$

Accepted Answer

The answer of R.Red formed a corporation with an authorization...

Question 9

Journalize the following independent transactions:
a)Casey Company sells 250 shares of $20 par-value common stock at $20.
b)Jacob Corporation sells 100 shares of $15 par-value common stock at $20.
c)Moss Inc.sells 40 shares of no-par common stock with a $15 stated value for $30 per share.

Accepted Answer

The answer of Journalize the following independent transactions:
a)Casey Company sells...

Question 10

Sunrise Online issued 500 shares of its $10 common stock in exchange for equipment with a fair market value of $7,500.The entry to record the transaction would include a:

Accepted Answer

The fair market value of the equipment received is $7,500, but only 500 shares were issued, with a par value of $10 per share. Therefore, the total par value of the shares issued is only $5,000 (500 shares x $10 per share = $5,000). This means that the remaining value of the equipment received (i.e. $7,500 - $5,000 = $2,500) is considered as "Paid-in Capital in Excess of Par Value". Therefore, the entry to record the transaction would include a credit to "Paid-in Capital in Excess of Par Value" for $2,500.

Question 11

The sale of common stock above par was recorded by crediting Common Stock for the total amount.This error would cause:

Accepted Answer

When common stock is sold above par, the amount received over par should be credited to an account such as "Additional Paid-In Capital" rather than crediting the entire amount to "Common Stock." However, this error affects the classification within stockholders' equity but does not change the total amount of stockholders' equity. Therefore, it does not cause stockholders' equity or net income to be overstated or understated; it merely misclassifies amounts within equity.

Question 12

The Collins Corporation Stockholders' Equity section includes the following: $\begin{array} { | l | r | } 
\hline  \text { Preferred Stock } & \$ 12,000 \
\hline \text { Common Stock } & 15,000 \
\hline \text { Paid-in Capital in Excess of Par-Preferred } & 2,700 \
\hline \text { Paid-in Capital in Excess of Par-Common } & 4,100 \
\hline \text { Retained Earnings } & 8,200 \
\hline
\end{array}$ What was the total amount preferred stock was sold for?

Accepted Answer

The preferred stock account shows 2,940 shares issued at $5 per share. So, the total amount preferred stock was sold for is $14,700 (2,940 x $5 = $14,700).

Question 13

The TM Stockholders' Equity section includes the following: $\begin{array} { | l | r | } 
\hline \text { Preferred Stock } & \$ 3,800 \
\hline \text { Common Stock } & 7,700 \
\hline \text { Paid-in Capital in Excess of Par-Preferred } & 400 \
\hline \text { Paid-in Capital in Excess of Par-Common } & 2,250 \
\hline \text { Retained Earnings } & 6,000 \
\hline
\end{array}$ What was the total amount common stock was sold for?

Accepted Answer

The answer of The TM Stockholders' Equity section includes the...

Question 14

ABC sells 400 shares of its $23 par common stock for $27.The entry would entail a credit(s)of:

Accepted Answer

The shares are sold for $27 each, which is $4 above the par value of $23. For 400 shares, the excess over par is $1,600 (400 shares x $4). The par value of the shares is $9,200 (400 shares x $23). Therefore, the entry would credit Common Stock for $9,200 and Paid-in Capital in Excess of Par-Common for $1,600.

Question 15

The Logan Company issued 140 shares of its $12 par value stock for $14 per share.The entry to record the receipt of cash and issuance of the stock would include a:

Accepted Answer

The answer of The Logan Company issued 140 shares of...

Question 16

The sale of common stock was recorded as a sale of preferred stock.This error would cause:

Accepted Answer

Recording the sale of common stock as preferred stock does not affect the total amount of stockholders' equity, as both types of stock are equity accounts. The error would misclassify the type of equity but not change the total equity amount, thus not affecting the period's net income or the overall size of stockholders' equity.

Question 17

If stock shares are sold at more than their par value,the excess money is called:

Accepted Answer

Paid-in capital in excess of par is the amount that is received by a company when they sell their stock at a price higher than their par value. This amount represents the premium that investors are willing to pay for owning a share in the company.

Question 18

When a company sells stock at an amount greater then par value,the excess amount is referred to as:

Accepted Answer

When a company sells stock at an amount greater than par value, the excess amount is called a premium. It is basically the amount at which the shares are sold above the face value or par value. This premium is typically seen as a sign of a healthy company and allows the company to raise more capital than what would be possible by just selling shares at par value. The premium amount is recorded in a separate account called "Share Premium" or "Paid-in Capital in Excess of Par Value".

Question 19

Dolly's Best issued 200 shares of its $10 common stock in exchange for used packaging equipment with a fair market value of $2,400.The entry to record the acquisition of the equipment would include a:

Accepted Answer

The entry to record the acquisition of the equipment would include a debit to Equipment for the fair market value of the equipment, which is $2,400 in this case. Common Stock is credited only for the par value of the stock issued, which is $10 per share, or $2,000 in total. There is no need to record a debit to Paid-in Capital in Excess of Par in this transaction.

Question 20

Carmen Corporation issued 200 shares of its $10 par value stock to an attorney.The shares are in full settlement for $8,000 of legal services to help set up the company.Prepare the journal entry for the stock issuance.

Accepted Answer

The answer of Carmen Corporation issued 200 shares of its...

Quiz 18: Corporations: Organizations and Stock