Question

4. The XYZ partnership has inventory (book value of $200,000 and fair value of $220,000) and fixed assets (book value of $800,000 and fair value of $880,000). It has no other assets. The partnership also has liabilities with both a book value and fair value of $300,000. Partnership capital is recorded as $700,000. The three partners are currently incorporating this business and plan to issue 10,000 shares of $10 par value common stock to each individual. In setting up the opening account balances for the new corporation, what should be reported as additional paid-in capital ?

		Zero
		$100,000
		$500,000
		$400,000

5. The board of directors for the Blank Corporation declares a $1 per share cash dividend on April 1, Year One, to be paid to owners of record on April 17, Year One, with the checks being distributed on April 29, Year One. Prior to April 1, the company had issued 100,000 shares of common stock but held 10,000 treasury shares. Another 10,000 shares were repurchased on April 25, Year One. On what date should the company decrease its working capital as a result of this dividend ?

		April 17, Year One
		April 1, Year One
		April 25, Year One
		April 29, Year One

6. A company has both common stock authorized and preferred stock authorized. What is the basic difference between these two types of ownership interest ?

		The owners of common stock have rights that are set by the state of incorporation whereas the owners of preferred stock have rights that are set by the stock contract
		The owners of common stock have voting rights whereas the owners of preferred stock do not have voting rights
		Common stock has a par value but preferred stock does not
		Common stock has a set dividend rate but preferred stock does not

Answer 1

Hi

As per HOMEWORKLIB RULES, one is supposed to answer only the first question if it is not mentioned.

Here,

The partnership business will be incorporated using the fair values of assets and liabilities.

The assets and liabilities will be recorded at their fair values after incorporation.

Hence we calculate the net assets of the business using the fair values.

Reduce the net assets from the partnership capital to arrive at the additional pay in capital to be issued.