Question

3.     Napis Co. is a brand new corporation that has not yet issued any stock. The corporation has                   approved the issuance of 500 shares of stock with a $1 par value to John Giles in exchange                       for equipment appraised at $900. The company is new, and no shares have ever been issued                           for cash. The equipment account should be debited for:

         a.    $1,000

         b.    $1,900

         c.    $900

         d.    Cannot tell from the information given

           4.    Radle Co. purchased 80 shares of treasury stock for $25 per share. The company later sold                        the shares for $20 per share. The account ‘Paid-in Capital from Treasury Stock’ currently has                              a balance of $500 in it. The entry to record the sale of the shares would include a

         a.    debit to Loss on Sale of Treasury Stock for $400.

         b.    credit to Treasury Stock for $2,000.

         c.    credit to Cash for $1,600.

         d.    credit to Paid-in Capital from Treasury Stock for $400.

              5.    Which of the following will decrease a company’s equity?

1. purchase of treasury stock
2. stock split
3. sale of treasury stock for more than cost

              

            6.    A company had 10,000 shares outstanding on 1/1. 1,000 new shares were issued on 6/1,             and 1,750 shares of treasury stock were purchased on 9/1. What is the weighted average                      number of shares to be used for the year-end earnings per share calculation (if necessary,                                  round to the neares whole share)?

                     a. 10,000                    b. 10,083             c. 10,063                           d. 9,250

7. Jones Corporation has 100,000 shares of $20 par value common stock outstanding. If Jones declares a 20% stock dividend on its common stock when the market value is $35 per share, for what amount will “Additional Paid-in Capital” be recorded?

1. $500,000
2. $700,000
3. $400,000
4. $300,000

            8.     Jackson Co. has 40,000 shares of $5 par value stock outstanding (total legal capital of                         $200,000). If Jackson splits the stock 2-for-1, what will be the total legal capital of all                          Jackson Co. shares after the split?

                     a. $400,000               b. $300,000                    c. $100,000                       d. $200,000

Answer 1

3.

Since the company is new, and no shares have ever been issued for cash, the market value of the shares issued to acquire the equipment cannot be determined. Therefore, the equipment account should be debited by the appraised value of the equipment.

The correct answer is c. $900

4.

The entry to record the sale of the shares would include a credit to Treasury Stock for $2,000.

Therefore, the correct answer is b. credit to Treasury Stock for $2,000

5.

Purchase of treasury stock will decrease a company's equity.

Therefore, the correct answer is a. purchase of treasury stock