Question 1

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

Accepted Answer

When stock shares are sold at a price higher than their par value, the additional amount received is known as "paid-in capital in excess of par value." This is recorded as a separate category on the balance sheet and is considered a part of the total equity of the company. Options A, C, and D are not correct as earnings refer to profits made by the company, gain on issue of stock is not a recognized accounting term, and discount on issue of stock refers to the amount by which the issue price is lower than the par value.

Question 2

Antiques.com Corporation's outstanding stock is 75 shares of $60,8% cumulative nonparticipating preferred stock and 2,000 shares of $10 par value common stock.Antiques paid $2,760 cash dividends during the year.Common stockholders received:

Accepted Answer

Preferred stockholders are entitled to receive $60.80 per share in dividends before any dividends can be paid to common stockholders. Since there are 75 shares of preferred stock outstanding, the total amount of dividends paid to preferred stockholders is $60.80 * 75 = $4,560. The remaining $2,760 - $4,560 = $2,400 is available for distribution to common stockholders.

Question 3

ABC sells 400 shares of its $20 par common stock for $25.The entry would entail a credit(s)of:

Accepted Answer

The entry involves crediting Common Stock for the par value of $8,000 (400 shares x $20) and crediting Paid-in Capital in Excess of Par Value-Common for the excess amount of $2,000 (400 shares x $5).

Question 4

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

Accepted Answer

The total stockholders' equity remains unchanged because both common and preferred stock are components of stockholders' equity. The misclassification does not affect the total equity amount.

Question 5

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 issuance of the stock involves both the par value and the excess of par value. The company issued 100 shares of $10 par value stock, which means the total par value of the stock issued is $1,000 (100 shares x $10 par value). However, the company received $1,500 for the legal services, which is $500 more than the par value. Therefore, the entry to record the issuance of the stock includes a credit to Common Stock for $1,000 (the par value of the shares) and a credit to Paid-in Capital in Excess of Par Value-Common for $500 (the amount over the par value). Hence, the correct answer is D.

Question 6

Rhubarb Corporation's outstanding stock is 100 shares of $100,11% cumulative nonparticipating preferred stock and 2,000 shares of $12 par value common stock.Rhubarb paid $2,200 cash dividends during the year.Common stockholders received:

Accepted Answer

The answer of Rhubarb Corporation's outstanding stock is 100 shares...

Question 7

The Harvester Corporation issued 50 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 entry would include a credit to Common Stock for the par value of the shares issued, which is 50 shares x $20 = $1,000.

Question 8

Preferred stock that is given a right to share with the common stock in dividends in excess of a stated preferred dividend rate is called:

Accepted Answer

Participating preferred stock is given the right to share in dividends in excess of a stated preferred dividend rate along with the common stock. Nonparticipating preferred stock only receives the stated preferred dividend rate. Cumulative preferred stock accrues dividends if they are not paid in a given period and noncumulative preferred stock does not.

Question 9

The TM Stockholders' Equity section includes the following:
$$\begin{array} { | l | r | } 
\hline\text { Preferred Stock } & \$ 3,800 \
\hline \text { Common Stock } & 5,950 \
\hline \text { Paid-in Capital in Excess of Par Value - Preferred } & 400 \
\hline \text { Paid-in Capital in Excess of Par Value - Common } & 1,750 \
\hline \text { Retained Earnings } & 6,000 \
\hline
\end{array}$$
What was the total amount common stock was sold for?

Accepted Answer

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

Question 10

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

Accepted Answer

The error does not affect total stockholders' equity because the excess over par should be credited to Additional Paid-In Capital, not Common Stock. Total equity remains the same.

Question 11

Soy.com Corporation has 100 shares of $100,7% cumulative nonparticipating preferred stock and 1,000 shares of $10 par value common stock outstanding.The company paid $4,000 cash dividends including one-year dividends in arrears to preferred stockholders.Preferred stockholders received:

Accepted Answer

The answer of Soy.com Corporation has 100 shares of $100,7%...

Question 12

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 entry would include a debit to Cash for $1,960 (140 shares x $14 per share).

Question 13

The Zonga Corporation Stockholders' Equity section includes the following:
$$\begin{array} { | l | r | } 
\hline\text { Preferred Stock } & \$ 22,500 \
\hline \text { Common Stock } & 48,000 \
\hline \text { Paid-in Capital in Excess of Par Value-Preferred } & 3,450 \
\hline \text { Paid-in Capital in Excess of Par Value-Common } & 3,400 \
\hline \text { Retained Earnings } & 7,350 \
\hline
\end{array}$$
Total paid-in capital is:

Accepted Answer

The answer of The Zonga Corporation Stockholders' Equity section includes...

Question 14

The Collins Corporation Stockholders' Equity section includes the following:
$$\begin{array} { | l | r | } 
\hline \text { Preferred Stock } & \$ 13,000 \
\hline \text { Common Stock } & 15,000 \
\hline \text { Paid-in Capital in Excess of Par Value -Preferred } & 3,100 \
\hline \text { Paid-in Capital in Excess of Par Value - Common } & 4,100 \
\hline \text { Retained Earnings } & 8,200 \
\hline
\end{array}$$
What was the total amount preferred stock was sold for?

Accepted Answer

The total amount preferred stock was sold for is the sum of the Preferred Stock and the Paid-in Capital in Excess of Par Value - Preferred, which is $13,000 + $3,100 = $16,100.

Question 15

Washington Corporation issued 5,000 shares of its $20 par value common stock for $23 per share.The entry to record the issuance would include a:

Accepted Answer

The credit to Common Stock should be for the par value of the shares issued, which is 5,000 shares x $20 par value = $100,000.

Question 16

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

Accepted Answer

When a company sells stock at an amount less than par value, it is referred to as a discount. Par value is the minimum price per share that a company must receive for their stock, so selling stock for less would be considered a discount. A premium, on the other hand, is when stock is sold for more than its par value. A bonus is an extra dividend or share distributed to existing shareholders, and the statement "Companies cannot sell stock for more than par value" is untrue as premiums can be charged.

Question 17

Alpha Corporation's has 1,500 shares of $40 par,7% cumulative preferred stock and 2,200 shares of $10 par common stock.Alpha paid $12,000 in cash dividends including one-year dividends in arrears to preferred stockholders.Common stockholders will receive:

Accepted Answer

The answer of Alpha Corporation's has 1,500 shares of $40...

Question 18

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 answer of Sunrise Online issued 500 shares of its...

Question 19

Custer.com Company's outstanding stock is 100 shares of $100,5% cumulative nonparticipating preferred stock and 1,000 shares of $10 par value common stock.Custer paid $2,300 cash dividends including one-year dividends in arrears to preferred stockholders.Common stockholders received:

Accepted Answer

The preferred stockholders are entitled to $5 per share in dividends each year before any dividends can be paid to the common stockholders. Since there are 100 shares of preferred stock outstanding, the preferred stockholders are entitled to $500 in dividends each year. Since the preferred dividends are cumulative, the company must pay the preferred stockholders the dividends that were in arrears before any dividends can be paid to the common stockholders. Since the preferred dividends were in arrears for one year, the company must pay the preferred stockholders $500 for the current year's dividends and $500 for the dividends that were in arrears, for a total of $1,000. The remaining $1,300 of dividends can be paid to the common stockholders.

Question 20

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 would include a credit to Common Stock for the par value (200 shares x $10 = $2,000) and a credit to Paid-in Capital in Excess of Par Value-Common for the excess amount ($2,400 - $2,000 = $400).

Quiz 18: Corporations: Organizations and Stock