Question

QUESTION 38 Macy's recorded journal entries for the issuance of common stock for $200,000, the payment of $65,000 on accounts payable, and the payment of salaries expense of $105,000. What net effect do these entries have on stockholders' equity? A. Increase of $200,000 B. Increase of $135,000 C. Increase of $95,000 D. Increase of $30,000. QUESTION 39 Grace Mercy Hospital financed the purchase of a Surgical System by making payments of $25,000 at the end of each of five years. The appropriate rate of interest was 8%. The future value of one for five periods at 8% is 1.46933. The future value of an ordinary annuity for five periods at 8% is 5.8666. The present value of an ordinary annuity for five periods at 8% is 3.99271. What was the cost of the Surgical System to Grace Mercy Hospital? A. $36,985 B. 599,818 C. $125,000 D. $146,668 QUESTION 40 Click Save and Submit to save and submit. Click Save All Answers to save all answers. Save All Answers MacBook Air 80 888 1 2 17

Answer 1

Question 38.

Option C. Increase of $95,000 is the correct answer.

The jounal entry will be

Cash A/c Dr. $30,000

To Common stock A/c $200,000

(Issue of Common Stock)

Accounts Payable A/c Dr. $65,000

To Cash A/c $65,000

(Payment towards accounts payable)

Salary Expenses A/c Dr. $105,000

To Cash A/c $105,000

(Being salary expenses paid)

Issue of common stock will increase stock holders equity by $200,000.

Payment towards accounts payable will not make any effect on stockholders equity.

Payment to salary expenses will reduce the stock holders equity that is $200,000 - $105,000 = $95,000.

since the payment of salary will reduce profit, a reduction in profit will reduce the shareholder's equity.

The other options are wrong.

Option A . did not considered subsequent salary payment. Hence it is wrong

Option B.did not considered subsequent salary payment but it considers payment to creditors it is wrong.

and Option D  instead of considering subsequent salary payment, taken into account both salary payment and payment to creditors it is a wrong treatment.

Question 39

Payments made at the end of the year = $25,000

Number of years = 5 years

Present value of an ordinary annuity for five periods at 8% = 3.99271

Therefore the cost of surgical system = $25,000 x 3.99271 = $99,818.

Therefore option B. $99,818 is correct.

The other options are wrong.