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1. When a company’s stock is actively traded on a major exchange is traded for equipment:...

1. When a company’s stock is actively traded on a major exchange is traded for equipment:

A. No entry is recorded because no cash was exchanged.

B. An asset is recorded for the fair value of the stock.

C. An asset is recorded for the appraised value of the equipment.

D. Paid-in capital is increased by the appraised value of the equipment.

2. Paid-in capital in excess of par is reported as:

A. A reduction of shareholders’ equity.

B. A noncurrent asset.

C. A noncurrent liability.

D. An increase in shareholders’ equity.

3. Share issue costs refer to the costs of obtaining the legal, promotional, and accounting services necessary to complete the sale of shares. The costs reduce the net cash proceeds from selling the shares and thus paid-in capital—excess of par, and are:

A. Not recorded separately.

B. Recorded as an asset.

C. Recorded as a liability.

D. Recorded as an asset, like a prepaid expense, and then amortized over the next several years.

4. Poodle Co. was organized on January 3, 2019. The firm was authorized to issue 100,000 shares of $5 par common stock. During 2019, Poodle had the following transactions relating to shareholders’ equity: Issued 30,000 shares of common stock at $7 per share. Issued 20,000 shares of common stock at $8 per share. Reported a net income of $$100,000. Paid dividends of $50,000. What is total paid-in capital at the end of 2019?

A. $420,000.

B. $370,000.

C. $470,000.

D. $320,000.

5. Montgomery & Co., a well-established law firm, provided 500 hours of its time to Fink Corporation in exchange for 1,000 shares of Fink's $5 par common stock. Montgomery's usual billing rate is $700 per hour, and Fink's stock has a book value of $250 per share. By what amount will Fink's paid-in capital—excess of par increase for this transaction?

A. $345,000.

B. $295,000.

C. $350,000.

D. $300,000.

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Answer #1

1) A. No entry is recorded because no cash was exchanged.

Because, trading of company stock won't effect the assets and liabilities.

2) D. An increase in shareholders' equity

Because, excess of par value would be consider as securities premium. Securities premium would lead to increase in shareholders' equity.

3) A.Not recorded separately

Because, Expenditure incured for issue of shares is categorized as miscellaneous expenditure. And share issue expenditure write off to profi&loss account in the year it is incurred.

4) B.$ 370,000

Because, paid up share capital is

30,000×7=210,000

20,000×8=160,000

Total paid in capital at the end of2019=$ 370,000

5) A.$ 345,000

Explanation given in pic

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