Question

Adam Corporation was incorporated on January 1, year 1, with the following authorized capital:

20,000 shares of common stock, no par value, stated value $40 per share

5,000 shares of 5% cumulative preferred stock, par value $10 per share

                  During year 1 , Adam issued 12,000 shares of common stock for a total of $600,000 and 3,000 shares pf preferred at $16 per share.  In addition, on December 20, subscriptions for 1,000 shares of preferred were taken at a price of $17 per share. These shares were paid for on January 2, year 2.  What should Adam report as contributed capital on December 31, year 1?

1. $648,000
2. $665,000
3. $520,000
4. $850,000

Answer 1

Answer: b. $665,000

Calculations:

Total contributed capital is total legal capital plus other paid-in amounts.

Thus,

Contributed capital

= $60,0000 for common stock + (3,000 x $16) for preferred stock +  (1,000 x $17) for preferred stock subscriptions

= $60,000 + $48,000 +$17,000

=$665,000

Hence, Adam should report as contributed capital on December 31, year 1 is $665,000