Question 1

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 2

The Collins Corporation Stockholders' Equity section includes the following:  What was the total amount preferred stock was sold for?

Accepted Answer

From the image, we can see that the preferred stock was sold at a par value of $100 per share and 147 shares were issued. Therefore, the total amount preferred stock was sold for is: $100 x 147 = $14,700. So, option B is the correct answer.

Question 3

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 4

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 referred to as a premium. This occurs when investors are willing to pay more than the initial investment to purchase the company's stock due to factors such as high demand or strong financial performance.

Question 5

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 6

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

Accepted Answer

When stock shares are sold at more than their par value, the additional money received is referred to as paid-in capital in excess of par. This is a type of equity account that reflects the amount of money above the par value that was paid by investors for shares of stock. The other options listed are not accurate descriptions of this situation.

Question 7

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...

Question 8

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

Accepted Answer

The answer of ABC sells 400 shares of its $23...

Question 9

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

Accepted Answer

The answer of A company issues no-par value with no...

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

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 11

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

Accepted Answer

The par value of the stock represents the minimum amount that the corporation can issue its shares for and is considered as the legal capital of the corporation.

Question 12

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 13

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.

Accepted Answer

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

Question 14

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 15

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 16

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 par value of each share is $10 so 500 shares have a total par value of $5,000. However, the equipment received in exchange has a fair market value of $7,500. Therefore, the entry to record this transaction would include a credit to Common Stock for $5,000 (500 shares x $10 par value) and a credit to Paid-in Capital in Excess of Par Value for the remaining $2,500 ($7,500 fair market value - $5,000 par value).

Question 17

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 answer of In exchange for $1,500 legal services to...

Question 18

The TM Stockholders' Equity section includes the following:  What was the total amount common stock was sold for?

Accepted Answer

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

Question 19

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

When a company issues shares, the total amount received from the sale is credited to Common Stock. In this case, the company issued 4,000 shares at $23 per share, for a total of $92,000. Therefore, the credit to Common Stock would be $80,000 ($20 par value x 4,000 shares), and the remaining $12,000 would be credited to Paid-in Capital in Excess of Par Value. There would also be a debit to Cash for $92,000. However, the only option that correctly identifies the credit to Common Stock is choice letter C.

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 debit to Equipment for $2,400, representing the fair market value of the packaging equipment acquired. No additional entry is necessary for Paid-in Capital in Excess of Par or Common Stock since the stock issuance is in exchange for the equipment rather than cash.

Quiz 18: Corporations: Organizations and Stock