ACCOUNTING

Week 4

 

Brief Exercise 13-4

On June 1, Noonan Inc. issues 4,000 shares of no-par common stock at a cash price of $6 per share. Journalize the issuance of the shares assuming the stock has a stated value of $1 per share. (Credit account titles are automatically indented when amount is entered. Do not indent manually.)

Cash = Issues shares x cash price = 4,000 x 6 = 24,000

Common Stock = Issues shares x stated value = 4,000 x 1 = 4,000

Paid-in Capital in Excess of Stated Value—Common Stock = 4,000 x 5(6-1) = 20,000

 

Account titles and explanation Debt Credit
Cash 24,000  
Common Stock   4,000
Paid-in Capital in Excess of Stated Value—Common Stock   20,000

 

Brief Exercise 13-7

Garb Inc. issues 5,000 shares of $100 par value preferred stock for cash at $130 per share. Journalize the issuance of the preferred stock. (Credit account titles are automatically indented when amount is entered. Do not indent manually.)

Cash =5,000 x 130 = 650,000

Preferred stock =5,000 x 100 = 500,000

Paid-in Capital in Excess of Par—Preferred Stock =5,000 x 30(130-100) = 150,000

Account titles and explanation Debt Credit
Cash 650,000  
Common Stock   500,000
Paid-in Capital in Excess of Par-Preferred Stock   150,000

Brief Exercise 13-8

Pine Corporation has the following accounts at December 31: Common Stock, $10 par, 5,000 shares issued, $50,000; Paid-in Capital in Excess of Par—Common Stock $30,000; Retained Earnings $45,000; and Treasury Stock, 500 shares, $11,000.

 

Prepare the stockholders’ equity section of the balance sheet. (Enter the account name only and do not provide the descriptive information provided in the question.)

Common stock, $10 par value, 5,000 shares issued and 4,500 shares outstanding = 5000 x 10 = 50,000

Treasury stock (500 common shares) = 11,000

 

Pine Corporation balance sheet December 31
Stockholders’ equity  
Paid-in Capital  
Capital Stock  
Common Stock 50,000
Additional Paid-in Stock  
Paid-in Capital in Excess of Par—Common Stock 30,000
Total paid in Capital  = 50,000 + 30,000 = 80,000
Retained Earnings 4,500
Total paid in Capital and Retained Earnings = 80,000 + 45,000(4,500 x 10) = 125,000
Less Treasury Stock 11,000?
Total Stockholders’ equity = 125,000 -11,000 = 114,000

 

Exercise 13-2

Andrea has prepared the following list of statements about corporations.Identify each statement as true or false.

1.      Corporation management is both an advantage and a disadvantage of a corporation compared to a proprietorship or a partnership. True

2.      Limited liability of stockholders, government regulations, and additional taxes are the major disadvantages of a corporation. False

3.      When a corporation is formed, organization costs are recorded as an asset. = False

4.      Each share of common stock gives the stockholder the ownership rights to vote at stockholder meetings, share in corporate earnings, keep the same percentage ownership when new shares of stock are issued, and share in assets upon liquidation. True

5.      The number of issued shares is always greater than or equal to the number of authorized shares. False

6.      A journal entry is required for the authorization of capital stock. False

7.      Publicly held corporations usually issue stock directly to investors. False

8.      The trading of capital stock on a securities exchange involves the transfer of already issued shares from an existing stockholder to another investor. True

9.      The market price of common stock is usually the same as its par value. False

10.  Retained earnings are the total amount of cash and other assets paid in to the corporation by stockholders in exchange for capital stock. False

 

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