On January 1, Maxine Corp. entered into a subscription contract for 100 shares of its $20 par common stock at a price of $50 per share. The contract required on a per share basis an immediate down payment of $10 and two $20 payments on February 1 and March 1 from subscribers. All the down payments were received on January 1 and all the installments due on February 1 were received on February 1. On March 1, the rest of the payments were received except from one subscriber of ten shares, who defaulted. These shares were later sold for $40 per share. An amount necessary to bring the proceeds up to the total subscription price was retained and the balance of the payments received from the defaulted subscriber was returned.
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The Answer of On January 1, Maxine Corp. entered into a subscription contract for 100 shares of its $20 par common stock at a price of $50 per share. The contract required on a per share basis an immediate down payment of $10 and two $20 payments on February 1 and March 1 from subscribers. All the down payments were received on January 1 and all the installments due on February 1 were received on February 1. On March 1, the rest of the payments were received except from one subscriber of ten shares, who defaulted. These shares were later sold for $40 per share. An amount necessary to bring the proceeds up to the total subscription price was retained and the balance of the payments received from the defaulted subscriber was returned.
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