When a corporation issues its capital stock in payment for services, the least appropriate basis for
recording the transaction is the - Correct Answers par value of the shares issued.
At the date of the financial statements, common stock shares issued would exceed common stock
shares outstanding as a result of the - Correct Answers payment in full of subscribed stock.
Manning Company issued 10,000 shares of its $5 par value common stock having a fair value of $25 per
share and 15,000 shares of its $15 par value preferred stock having a fair value of $20 per share for a
lump sum of $520,000. How much of the proceeds would be allocated to the common stock?
A) $276,250
B) $250,000
C) $283,636
D) $236,364 - Correct Answers 10,000*25+ 15,000*20= 550,000
(250k/550k)*520k = 236,364
Berry Corporation has 100,000 shares of $10 par common stock authorized. The following transactions
took place during 2020, the first year of the corporation's existence :Sold 20,000 shares of common
stock for $13.50 per share. Issued 20,000 shares of common stock in exchange for a patent valued at
$300,000.At the end of the Berry's first year, total paid-in capital amounted to - Correct Answers APIC=
(13.5-10)+ 300k = 570k
Pember Corporation started business in 2015 by issuing 200,000 shares of $20 par common stock for
$27 each. In 2020, 25,000 of these shares were purchased for $39 per share by Pember Corporation and
held as treasury stock. On June 15, 2021, these 25,000 shares were exchanged for a piece of property
that had an assessed value of $760,000. Pember's stock is actively traded and had a market price of $45
on June 15, 2021. The cost method is used to account for treasury stock. The amount of paid-in capital
from treasury stock transactions resulting from the above events would be - Correct Answers (45-
39)*25k= 150k
An analysis of stockholders' equity of Hahn Corporation as of January 1, 2021, is as follows: Common
stock, par value $20; authorized 100,000 shares; issued and outstanding 90,000 shares$1,800,000 Paid-
in capital in excess of par 900,000 Retained earnings 760,000Total$3,460,000Hahn uses the cost method
of accounting for treasury stock and during 2021 entered into the following transactions :Acquired 2,500
shares of its stock for $75,000.Sold 2,000 treasury shares at $35 per share. Sold the remaining treasury
,shares at $20 per share. Assuming no other equity transactions occurred during 2021, what should Hahn
report at December 31, 2021, as total additional paid-in capital? - Correct Answers 900k+2,000*5-
500*10= 905,000
Luther Inc., has 4,000 shares of 5%, $50 par value, cumulative preferred stock and 100,000 shares of $1
par value common stock outstanding at December 31, 2021, and December 31, 2020. The board of
directors declared and paid an $8,000 dividend in 2020. In 2021, $40,000 of dividends are declared and
paid. What are the dividends received by the preferred stockholders in 2021? - Correct Answers
4000*50*.05= 10,000
(10,000-8,000)=10,000 = 12,000
Gibbs Corporation owned 20,000 shares of Oliver Corporation's $5 par value common stock. These
shares were purchased in 2017 for $225,000. On September 15, 2021, Gibbs declared a property
dividend of one share of Oliver for every ten shares of Gibbs held by a stockholder. On that date, when
the market price of Oliver was $35 per share, there were 180,000 shares of Gibbs outstanding. What
NET reduction in retained earnings would result from this property dividend? - Correct Answers
180k/10 * 35 = 630k
630k- [630k-(225k*18/20)] = 202,500
The stockholders' equity of Howell Company at July 31, 2021 is presented below: Common stock, par
value $20, authorized 400,000 shares; issued and outstanding 160,000 shares$3,200,000Paid-in capital
in excess of par160,000Retained earnings 650,000$4,010,000On August 1, 2021, the board of directors
of Howell declared a 15% stock dividend on common stock, to be distributed on September 15th. The
market price of Howell's common stock was $70 on August 1, 2021, and $76 on September 15, 2021.
What is the amount of the debit to retained earnings as a result of the declaration and distribution of
this stock dividend? - Correct Answers 160k* .15* 70= 1,680,000
Layne Corporation had the following information in its financial statements for the years ended 2020
and 2021:Cash dividends for the year 2021$ 10,000Net income for the year ended 202193,000Market
price of stock, 12/31/2010Market price of stock, 12/31/21 12Common stockholders' equity, 12/31/20
1,600,000Common stockholders' equity, 12/31/21 1,980,000Outstanding shares, 12/31/21
160,000Preferred dividends for the year ended 2021 15,000What is the book value per share for Layne
Corporation for the year ended 2021? - Correct Answers 1,980,000/160k = 12.38
Sealy Corporation had the following information in its financial statements for the years ended 2020 and
2021:Cash dividends for the year 2021 $ 5,000Net income for the year ended 2021 97,000Market price
of stock, 12/31/2010Market price of stock, 12/31/2112Common stockholders' equity, 12/31/20
1,000,000Common stockholders' equity, 12/31/21 1,200,000Outstanding shares, 12/31/21
, 100,000Preferred dividends for the year ended 202115,000What is the rate of return on common stock
equity for Sealy Corporation for the year ended 2021? - Correct Answers 97k-15k /
[(1,000,000+1,200,000)/2] = 7.5%
Written, Inc. has outstanding 600,000 shares of $2 par common stock and 120,000 shares of no-par 6%
preferred stock with a stated value of $5. Dividends have been paid in every year except the past two
years and the current year. Assuming that $270,000 will be distributed, and the preferred stock is
cumulative and participating, how much will the common stockholders receive? - Correct Answers
1,200,000*.06 = 72k current year
1,200,000* .05 participating = 60k+72k = 132k
In 2020, Eklund, Inc., issued for $103 per share, 90,000 shares of $100 par value convertible preferred
stock. One share of preferred stock can be converted into three shares of Eklund's $25 par value
common stock at the option of the preferred stockholder. In August 2021, all of the preferred stock was
converted into common stock. The market value of the common stock at the date of the conversion was
$30 per share. What total amount should be credited to additional paid-in capital from common stock as
a result of the conversion of the preferred stock into common stock? - Correct Answers 9,270,000-
(90k*3*25) = 2,520,000
On December 1, 2021, Lester Company issued at 103, eight hundred of its 9%, $1,000 bonds. Attached
to each bond was one detachable stock warrant entitling the holder to purchase 10 shares of Lester's
common stock. On December 1, 2021, the market value of the bonds, without the stock warrants, was
95, and the market value of each stock purchase warrant was $50. The amount of the proceeds from the
issuance that should be accounted for as the initial carrying value of the bonds payable would be -
Correct Answers 800,000* .95 + 800*50= 800,000, 800K * 1.03 = 824K , 824K* .95 = 782,800
On April 7, 2021, Kegin Corporation sold a $6,000,000, twenty-year, 8 percent bond issue for
$6,360,000. Each $1,000 bond has two detachable warrants, each of which permits the purchase of one
share of the corporation's common stock for $30. The stock has a par value of $25 per share.
Immediately after the sale of the bonds, the corporation's securities had the following market values:
8% bond without warrants$1,008
Warrants 21
Common stock28 - Correct Answers Bonds Payable$6,000,000 Premium on Bonds Payable105,600Paid-
in Capital Stock Warrants254,400
On July 1, 2021, Chen Company issued for $9,450,000 a total of 90,000 shares of $100 par value, 7%
noncumulative preferred stock along with one detachable warrant for each share issued. Each warrant
recording the transaction is the - Correct Answers par value of the shares issued.
At the date of the financial statements, common stock shares issued would exceed common stock
shares outstanding as a result of the - Correct Answers payment in full of subscribed stock.
Manning Company issued 10,000 shares of its $5 par value common stock having a fair value of $25 per
share and 15,000 shares of its $15 par value preferred stock having a fair value of $20 per share for a
lump sum of $520,000. How much of the proceeds would be allocated to the common stock?
A) $276,250
B) $250,000
C) $283,636
D) $236,364 - Correct Answers 10,000*25+ 15,000*20= 550,000
(250k/550k)*520k = 236,364
Berry Corporation has 100,000 shares of $10 par common stock authorized. The following transactions
took place during 2020, the first year of the corporation's existence :Sold 20,000 shares of common
stock for $13.50 per share. Issued 20,000 shares of common stock in exchange for a patent valued at
$300,000.At the end of the Berry's first year, total paid-in capital amounted to - Correct Answers APIC=
(13.5-10)+ 300k = 570k
Pember Corporation started business in 2015 by issuing 200,000 shares of $20 par common stock for
$27 each. In 2020, 25,000 of these shares were purchased for $39 per share by Pember Corporation and
held as treasury stock. On June 15, 2021, these 25,000 shares were exchanged for a piece of property
that had an assessed value of $760,000. Pember's stock is actively traded and had a market price of $45
on June 15, 2021. The cost method is used to account for treasury stock. The amount of paid-in capital
from treasury stock transactions resulting from the above events would be - Correct Answers (45-
39)*25k= 150k
An analysis of stockholders' equity of Hahn Corporation as of January 1, 2021, is as follows: Common
stock, par value $20; authorized 100,000 shares; issued and outstanding 90,000 shares$1,800,000 Paid-
in capital in excess of par 900,000 Retained earnings 760,000Total$3,460,000Hahn uses the cost method
of accounting for treasury stock and during 2021 entered into the following transactions :Acquired 2,500
shares of its stock for $75,000.Sold 2,000 treasury shares at $35 per share. Sold the remaining treasury
,shares at $20 per share. Assuming no other equity transactions occurred during 2021, what should Hahn
report at December 31, 2021, as total additional paid-in capital? - Correct Answers 900k+2,000*5-
500*10= 905,000
Luther Inc., has 4,000 shares of 5%, $50 par value, cumulative preferred stock and 100,000 shares of $1
par value common stock outstanding at December 31, 2021, and December 31, 2020. The board of
directors declared and paid an $8,000 dividend in 2020. In 2021, $40,000 of dividends are declared and
paid. What are the dividends received by the preferred stockholders in 2021? - Correct Answers
4000*50*.05= 10,000
(10,000-8,000)=10,000 = 12,000
Gibbs Corporation owned 20,000 shares of Oliver Corporation's $5 par value common stock. These
shares were purchased in 2017 for $225,000. On September 15, 2021, Gibbs declared a property
dividend of one share of Oliver for every ten shares of Gibbs held by a stockholder. On that date, when
the market price of Oliver was $35 per share, there were 180,000 shares of Gibbs outstanding. What
NET reduction in retained earnings would result from this property dividend? - Correct Answers
180k/10 * 35 = 630k
630k- [630k-(225k*18/20)] = 202,500
The stockholders' equity of Howell Company at July 31, 2021 is presented below: Common stock, par
value $20, authorized 400,000 shares; issued and outstanding 160,000 shares$3,200,000Paid-in capital
in excess of par160,000Retained earnings 650,000$4,010,000On August 1, 2021, the board of directors
of Howell declared a 15% stock dividend on common stock, to be distributed on September 15th. The
market price of Howell's common stock was $70 on August 1, 2021, and $76 on September 15, 2021.
What is the amount of the debit to retained earnings as a result of the declaration and distribution of
this stock dividend? - Correct Answers 160k* .15* 70= 1,680,000
Layne Corporation had the following information in its financial statements for the years ended 2020
and 2021:Cash dividends for the year 2021$ 10,000Net income for the year ended 202193,000Market
price of stock, 12/31/2010Market price of stock, 12/31/21 12Common stockholders' equity, 12/31/20
1,600,000Common stockholders' equity, 12/31/21 1,980,000Outstanding shares, 12/31/21
160,000Preferred dividends for the year ended 2021 15,000What is the book value per share for Layne
Corporation for the year ended 2021? - Correct Answers 1,980,000/160k = 12.38
Sealy Corporation had the following information in its financial statements for the years ended 2020 and
2021:Cash dividends for the year 2021 $ 5,000Net income for the year ended 2021 97,000Market price
of stock, 12/31/2010Market price of stock, 12/31/2112Common stockholders' equity, 12/31/20
1,000,000Common stockholders' equity, 12/31/21 1,200,000Outstanding shares, 12/31/21
, 100,000Preferred dividends for the year ended 202115,000What is the rate of return on common stock
equity for Sealy Corporation for the year ended 2021? - Correct Answers 97k-15k /
[(1,000,000+1,200,000)/2] = 7.5%
Written, Inc. has outstanding 600,000 shares of $2 par common stock and 120,000 shares of no-par 6%
preferred stock with a stated value of $5. Dividends have been paid in every year except the past two
years and the current year. Assuming that $270,000 will be distributed, and the preferred stock is
cumulative and participating, how much will the common stockholders receive? - Correct Answers
1,200,000*.06 = 72k current year
1,200,000* .05 participating = 60k+72k = 132k
In 2020, Eklund, Inc., issued for $103 per share, 90,000 shares of $100 par value convertible preferred
stock. One share of preferred stock can be converted into three shares of Eklund's $25 par value
common stock at the option of the preferred stockholder. In August 2021, all of the preferred stock was
converted into common stock. The market value of the common stock at the date of the conversion was
$30 per share. What total amount should be credited to additional paid-in capital from common stock as
a result of the conversion of the preferred stock into common stock? - Correct Answers 9,270,000-
(90k*3*25) = 2,520,000
On December 1, 2021, Lester Company issued at 103, eight hundred of its 9%, $1,000 bonds. Attached
to each bond was one detachable stock warrant entitling the holder to purchase 10 shares of Lester's
common stock. On December 1, 2021, the market value of the bonds, without the stock warrants, was
95, and the market value of each stock purchase warrant was $50. The amount of the proceeds from the
issuance that should be accounted for as the initial carrying value of the bonds payable would be -
Correct Answers 800,000* .95 + 800*50= 800,000, 800K * 1.03 = 824K , 824K* .95 = 782,800
On April 7, 2021, Kegin Corporation sold a $6,000,000, twenty-year, 8 percent bond issue for
$6,360,000. Each $1,000 bond has two detachable warrants, each of which permits the purchase of one
share of the corporation's common stock for $30. The stock has a par value of $25 per share.
Immediately after the sale of the bonds, the corporation's securities had the following market values:
8% bond without warrants$1,008
Warrants 21
Common stock28 - Correct Answers Bonds Payable$6,000,000 Premium on Bonds Payable105,600Paid-
in Capital Stock Warrants254,400
On July 1, 2021, Chen Company issued for $9,450,000 a total of 90,000 shares of $100 par value, 7%
noncumulative preferred stock along with one detachable warrant for each share issued. Each warrant
