Corporations

“Issuance of stocks& preparing balance sheet

stockholder’s equity Section”

81.Jackson Company is a publicly held corporation whose $1 par value stock is actively traded at
$64 per share. The company issued 3,000 shares of stock to acquire land recently
advertised at $200,000. When recording this transaction, Barton Company will
a. debit Land for $200,000.
b. credit Common Stock for $192,000.
c. debit Land for $192,000.
d. credit Paid-In Capital in Excess of Par for $196,000.
Ans: c
Solution: (3,000) ($64)  $192,000

82.Sunshine Company issued 4,000 shares of its $5 par value common stock in payment of its
attorney's bill of $80,000. The bill was for services performed in helping the company
incorporate. Crain should record this transaction by debiting
a. Legal Expense for $20,000.
b. Legal Expense for $80,000.
c. Organization Expense for $20,000.
d. Organization Expense for $80,000.
Ans: d

85.Delta Corp. issues 4,000 shares of $10 par value common stock at $14 per share. When the
transaction is recorded, credits are made to
a. Common Stock $40,000 and Paid-in Capital in Excess of Stated Value $16,000.
b. Common Stock $56,000.
c. Common Stock $40,000 and Paid-in Capital in Excess of Par $16,000.
d. Common Stock $40,000 and Retained Earnings $16,000.
Ans: c
Solution: (4,000) ($10)  $40,000; (4,000) ($14  $10)  $16,000

86.If Merril Company issues 9,000 shares of $5 par value common stock for $160,000, the
account
a. Common Stock will be credited for $45,000.
b. Paid-in Capital in Excess of Par will be credited for $45,000.
c. Paid-in Capital in Excess of Par will be credited for $160,000.
d. Cash will be debited for $115,000.
Ans: a
Solution: (9,000) ($5)  $45,000

89.H. Tillman performed legal services for J. Laney. Due to a cash shortage, an agreement was
reached whereby J. Laney. would pay H. Tillman a legal fee of approximately $4,000 by
issuing 1,000 shares of its common stock (par $1). The stock trades on a daily basis and
the market price of the stock on the day the debt was settled is $4.50 per share. Given
this information, the journal entry for J. Laney. to record this transaction is:
 a. Legal Expense 4,500
Common Stock 4,500
b. Legal Expense 4,000
Common Stock 4,000
c. Legal Expense 4,000
Common Stock 1,000
Paid-in Capital in Excess of Par – Common 3,000
d. Legal Expense 4,500
Common Stock 1,000
Paid-in Capital in Excess of Par – Common 3,500
Ans: d

Solution: (1,000) ($4.50)  $4,500; $4,500  $1,000  $3,500

90.Hayes Construction Company issued 1,200 shares of no-par common stock for $17,600.
Which of the following journal entries would be made if the stock has no stated value?
a. Cash 17,600
Common Stock 17,600
b. Cash 17,600
Common Stock 1,200
Paid-in Capital in Excess of Par 16,400
c. Cash 17,600
Common Stock 1,200
Paid-in Capital in Excess of Stated Value 16,400
d. Common Stock 17,600
Cash 17,600
Ans: a

93. The following data is available for Santos Service Corporation at December 31, 2017:
Common stock, par $10 (authorized 100,000 shares) $400,000
Treasury Stock (at cost $15 per share) $ 27,000
Based on the data, how many shares of common stock are outstanding?
a. 50,000
b. 40,000
c. 49,880
d. 38,200
Ans: d
Solution: ($400,000$10)  ($27,000$15)  38,200

94.The following data is available for Santos Service Corporation at December 31, 2017:
Common stock, par $10 (authorized 100,000 shares) $400,000
Treasury Stock (at cost $15 per share) $ 27,000
Based on the data, how many shares of common stock have been issued?
a. 50,000
b. 40,000
 c. 49,880
d. 38,200
Ans: b
Solution: ($400,000$10)  40,000

96.Kagan Corporation was organized on January 2, 2017. During 2017, Kagan issued 40,000
shares at $24 per share, purchased 6,000 shares of treasury stock at $26 per share, and
had net income of $600,000. What is the total amount of stockholders’ equity at December
31, 2017?
a. $1,280,000
b. $1,404,000
c. $1,416,000
d. $1,440,000
Ans: b
Solution: (40,000) ($24)  (6,000) ($26)  $600,000  $1,404,000

98.A corporation purchases 60,000 shares of its own $30 par common stock for $45 per share,
recording it at cost. What will be the effect on total stockholders’ equity?
a. Increase by $2,700,000
b. Decrease by $1,800,000
c. Decrease by $2,700,000
d. Increase by $1,800,000
Ans: c
Solution: (60,000) ($45)  $2,700,000

102. Katy Hooper Inc. issued 6,000 shares of no-par common stock with a stated value of $5
per share. The market price of the stock on the date of issuance was $14 per share. The
entry to record this transaction includes a
a. debit to Cash for $30,000.
b. credit to Common Stock for $84,000.
c. credit to Common Stock for $30,000.
d. debit to Paid-in Capital in Excess of Par for $84,000.
Ans: c
Solution: (6,000) ($5)  $30,000

BE 1
On July 6, Crevasse Corporation issued 2,000 shares of its $1.50 par common stock. The market
price of the stock on that date was $18 per share. Journalize the issuance of the stock.

Solution 1
July 6 Cash (2,000 × $18) ................................................................ 36,000
Common Stock ............................................................. 3,000
Paid in Capital in Excess of Par .................................... 33,000
BE 2
On February 1, Westwood Corporation issued 5,000 shares of its $20 par value preferred stock
for $26 per share.

Instructions
Journalize the transaction.

Solution 2
Feb. 1 Cash ..................................................................................... 130,000
Preferred Stock ............................................................ 100,000
Paid-in Capital in Excess of Par—Preferred
Stock .......................................................................... 30,000
(Issued 5,000 shares at $26 per share)

BE 3
Orley Company had the following transactions.
1. Issued 5,000 shares of common stock with a stated value of $10 for $130,000.
2. Issued 2,000 shares of $100 par preferred stock at $108 for cash.

Instructions
Prepare the journal entries to record the above stock transactions.
Solution 3
1. Cash .............................................................................................. 130,000
Common Stock ...................................................................... 50,000
Paid-in Capital in Excess of Stated Value—Common Stock .. 80,000

2. Cash .............................................................................................. 216,000

Preferred Stock...................................................................... 200,000
Paid-in Capital in Excess of Par—Preferred Stock ................. 16,000

BE 4
Charleston Corporation has the following accounts at December 31: Common Stock, $10 par
7,000 shares issued, $70,000; Paid-in Capital in Excess of Par $10,000; Retained Earnings
$45,000; and Treasury Stock—Common, 500 shares, $10,000. Prepare the stockholders' equity
section of the balance sheet.
Solution 4
Stockholders' equity
Paid-in capital
Capital stock
Common stock, $10 par value, 7,000 shares
issued and 6,500 shares outstanding $70,000
Additional paid-in capital
In excess of par—common stock 10,000
Total paid-in capital 80,000
Retained earnings 45,000
Total paid-in capital and retained earnings 125,000
Less: Treasury stock—common (500 shares) 10,000
Total stockholders' equity $115,000

Ex. 1
Prytania Corporation is authorized to issue 1,000,000 shares of $5 par value common stock.
During 2017, its first year of operation, the company has the following stock transactions.
Jan. 1 Paid the state $5,000 for incorporation fees.
Jan. 15 Issued 500,000 shares of stock at $6 per share.
Jan. 30 Attorneys for the company accepted 500 shares of common stock as payment for legal
services rendered in helping the company incorporate. The legal services are
estimated to have a value of $7,000.
July 2 Issued 100,000 shares of stock for land. The land had an asking price of $900,000.
The stock is currently selling on a national exchange at $8 per share.
Sept. 5 Purchased 15,000 shares of common stock for the treasury at $9 per share.
Dec. 6 Sold 11,000 shares of the treasury stock at $11 per share.

Instructions
Journalize the transactions for Prytania Corporation.
Solution 1
Jan. 1 Organization Expense ........................................................ 5,000
Cash .......................................................................... 5,000
Jan. 15 Cash ................................................................................... 3,000,000
Common Stock .......................................................... 2,500,000
Paid-In Capital in Excess of Par ................................. 500,000
Jan. 30 Organization Expense ........................................................ 7,000
Common Stock .......................................................... 2,500
Paid-in Capital in Excess of Par ................................. 4,500
July 2 Land ................................................................................... 800,000
Common Stock .......................................................... 500,000
Paid-In Capital in Excess of Par ................................. 300,000
Sept. 5 Treasury Stock ................................................................... 135,000
Cash .......................................................................... 135,000
Dec. 6 Cash ................................................................................... 121,000
Treasury Stock ........................................................... 99,000
Paid-In Capital from Treasury Stock ........................... 22,000
Ex. 2
Zeus Corporation issued 5,000 shares of stock.

Instructions
Prepare the entry for the issuance under the following assumptions.
(a) The stock had a par value of $5 per share and was issued for a total of $65,000.
(b) The stock had a stated value of $5 per share and was issued for a total of $65,000.
(c) The stock had a par value of $5 per share and was issued to attorneys for services during
in-corporation valued at $65,000.
(d) The stock had a par value of $5 per share and was issued for land worth $65,000.

Solution 2
(a) Cash 65,000
Common Stock (5,000  $5) 25,000
Paid-in Capital in Excess of Par 40,000
(b) Cash 65,000
Common Stock (5,000  $5) 25,000
Paid-in Capital in Excess of Stated Value 40,000
(c) Organization Expense 65,000
Common Stock (5,000  $5) 25,000
Paid-in Capital in Excess of Par 40,000
(d) Land 65,000
Common Stock (5,000  $5) 25,000
Paid-in Capital in Excess of Par 40,000

Ex. 3
The following stockholders’ equity accounts, arranged alphabetically, are in the ledger of Kalmia
Corporation at December 31, 2017.

Common Stock ($5 stated value) $2,200,000

Paid-in Capital in Excess of Par—Preferred Stock 280,000
Paid-in Capital in Excess of Stated Value—Common Stock 800,000
Preferred Stock (8%, $100 par, noncumulative) 500,000
Retained Earnings 1,334,000
Treasury Stock—Common (10,000 shares) 120,000

Instructions
Prepare the stockholders’ equity section of the balance sheet at December 31, 2017.
Solution 3
KALMIA CORPORATION
Partial Balance Sheet
December 31, 2017
Stockholders’ equity
Paid-in capital
Capital stock
8% Preferred stock, $100 par
value, noncumulative, 5,000
shares issued $ 500,000
Common stock, no par, $5
stated value, 440,000
shares issued and 430,000
shares outstanding 2,200,000
Total capital stock
2,700,000
Additional paid-in capital
In excess of par—
preferred stock $280,000
In excess of stated value—
common stock 800,000
Total additional paid-in
capital 1,080,000
Total paid-in capital 3,780,000
Retained earnings 1,334,000
Total paid-in capital and
retained earnings
5,114,000
Less: Treasury stock (10,000 common
shares) 120,000
Total stockholders’ equity $4,994,000

Ex. 4
Echota Corporation has the following capital stock outstanding at December 31, 2017:
7% Preferred stock, $100 par value, cumulative
15,000 shares issued and outstanding ................................................... $1,500,000

Common stock, no par, $10 stated value, 500,000 shares authorized,

350,000 shares issued and outstanding ................................................. 3,500,000
The preferred stock was issued at $120 per share. The common stock was issued at an average
per share price of $14.
Instructions
Prepare the paid-in capital section of the balance sheet at December 31, 2017.
Solution 4
Stockholders' equity
Paid-in capital
Capital stock
7% Preferred stock, $100 par value, cumulative
15,000 shares issued and outstanding $1,500,000
Common stock, no par, $10 stated value, 500,000
shares authorized, 350,000 shares issued and
outstanding 3,500,000
Total capital stock 5,000,000
Additional paid-in capital
In excess of par—preferred stock $ 300,000*
In excess of stated value—common stock 1,400,000**
Total additional paid-in capital 1,700,000
Total paid-in capital $6,700,000

*15,000 shares × $20 = $300,000.

**350,000 shares × $4 = $1,400,000.

Ex. 5
In its first year of operations, Banner Elk Corporation had the following transactions pertaining to
its $10 par value preferred stock.
Feb. 1 Issued 6,000 shares for cash at $43 per share.
Nov. 1 Issued 3,000 shares for cash at $45 per share.

Instructions
(a) Journalize the transactions.
(b) Indicate the amount to be reported for (1) preferred stock, and (2) paid-in capital in excess
of par — preferred stock at the end of the year.
Ans: N/A, LO: 2, Bloom: AP, Difficulty: Medium, Min: 8, AACSB: Analytic, AICPA BB: Industry/Sector, AICPA FN: Measurement, AICPA PC: Problem
Solving, IMA: FSA

Solution 5
(a) Feb. 1 Cash............................................................................... 258,000
Preferred Stock .................................................... 60,000
Paid-in Capital in Excess of Par—Preferred
Stock .................................................................... 198,000
(Issued 6,000 shares at $43 per share)

Nov. 1Cash............................................................................... 135,000

Preferred Stock .................................................... 30,000
Paid-in Capital in Excess of Par—Preferred
Stock .................................................................... 105,000
(Issued 3,000 shares at $45 per share)
(b) (1) Preferred stock: $60,000 + $30,000 = $90,000.

(2) Paid-in Capital in Excess of Par—Preferred Stock: $198,000 + $105,000 = $303,000.