Question 1

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 2

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

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The answer of A separate paid-in capital account is used...

Question 3

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

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

Question 4

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

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

Question 5

Ralston Company is authorized to issue 10,000 shares of 8%, $100 par value preferred stock and 500,000 shares of no-par common stock with a stated value of $1 per share. If Ralston issues 9,000 shares of common stock to pay its recent attorney's bill of $37,500 for legal services on a land access dispute, which of the following would be the journal entry for Ralston to record?

Accepted Answer

The answer of Ralston Company is authorized to issue 10,000...

Question 6

Carson Packaging Corporation began business in 2018 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, 2018 balance sheet, Carson Packaging would report

Accepted Answer

The answer of Carson Packaging Corporation began business in 2018...

Question 7

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 2,000 shares of common stock is $10 per share, for a total par value of $20,000. However, the shares were issued at $16 per share, which means that the company received $6 per share in excess of the par value. Therefore, the journal entry to record the issuance of the stock would be a debit to Cash for $32,000 (2,000 shares x $16 per share) and a credit to Common Stock for $20,000 (2,000 shares x $10 par value per share) and a credit to Paid-in Capital in Excess of Par for $12,000 (2,000 shares x $6 excess of par value per share).

Question 8

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

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Question 9

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

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

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?

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

Question 11

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

Accepted Answer

The par value of the stock is $5, so the total par value of 5,000 shares is $25,000 (5,000 shares x $5 par value). Since the company is issuing the stock for $175,000, the excess of cash received over the par value of the stock is $150,000 ($175,000 - $25,000). This excess is credited to the account Paid-In Capital in Excess of Par, so the correct answer is C. Common Stock will be credited for the par value of the stock, which is $25,000. The journal entry for the issuance of the stock would be:

Debit: Cash $175,000 
Credit: Common Stock $25,000 
Credit: Paid-In Capital in Excess of Par $150,000

Question 12

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 for services related to helping the company incorporate, which is an organizational expense. Therefore, Crain should debit the Organization Expense account for the full amount of $30,000. Since the company issued 2,000 shares of its $5 par value common stock, it would credit the Common Stock account for $10,000 (2,000 shares x $5 par value).

Question 13

Darman Company issued 700 shares of no-par common stock for $7,700. Which of the following journal entries would be made if the stock has a stated value of $2 per share?

Accepted Answer

The answer of Darman Company issued 700 shares of no-par...

Question 14

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 at fair value. This is because fair value represents the most accurate estimate of the value of the asset at the time of the transaction. Recording the asset at cost would not be appropriate, as the value of the asset may have changed since it was acquired. Recording the asset at zero or a nominal amount would not reflect the true value of the asset and would not be in compliance with accounting standards.

Question 15

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 should be credited to Paid-in Capital in Excess of Par. This account represents the amount received from the sale of stock above the par value, which is considered additional capital contributed by shareholders. The cash account would only be credited for the total amount received, including the par value. Retained Earnings and Legal Capital are not affected by the issuance of common stock.

Question 16

In the financial statements, organization costs appears

Accepted Answer

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

Question 17

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:

Accepted Answer

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

Question 18

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 stock is issued to acquire an asset, the cost of the asset is recorded at the fair value of the stock issued. In this case, the fair value of the stock is $31 per share, so the cost of the land is $93,000 (3,000 shares x $31 per share). Therefore, the Land account is debited for $93,000. There is no need to credit Common Stock or Paid-In Capital in Excess of Par since the stock is issued at its par value of $1.

Question 19

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 20

Paid-In Capital in Excess of Stated Value

Accepted Answer

Paid-In Capital in Excess of Stated Value is the amount received from the issuance of stock above its stated value or par value. It is reported as part of paid-in capital on the balance sheet, separate from the stated value or par value.

Quiz 11: Corporations: Organization, Stock Transactions, and Stockholders Equity