Chp 15&16

Manning Company issued 10,000 shares of its $5 par value common stock having a fair value of $25 per share and 15,000 shares of its $15 par value preferred stock having a fair value of $20 per share for a lump sum of $520,000. How much of the proceeds would be allocated to the common stock? a. $250,000 b. $236,364 c. $283,636 d. $276,250

b. $236,364

Which of the following statements about property dividends is not true? a. A property dividend is usually in the form of securities of other companies. b. A property dividend is also called a dividend in kind. c. The accounting for a property dividend should be based on the carrying value (book value) of the nonmonetary assets transferred. d. Property dividends may be merchandise or real estate.

c. The accounting for a property dividend should be based on the carrying value (book value) of the nonmonetary assets transferred.

Percy Corporation was organized on January 1, 2018, with an authorization of 1,200,000 shares of common stock with a par value of $6 per share. During 2018, the corporation had the following capital transactions: January 5 issued 600,000 shares @ $10 per share July 28 purchased 80,000 shares @ $11 per share December 31 sold the 80,000 shares held in treasury @ $18 per share Percy used the cost method to record the purchase and reissuance of the treasury shares. What is the total amount of additional paid-in capital as of December 31, 2018? a. $-0-. b. $1,840,000. c. $2,400,000. d. $2,960,000.

d. $2,960,000.

Gibbs Corporation owned 20,000 shares of Oliver Corporation's $5 par value common stock. These shares were purchased in 2014 for $225,000. On September 15, 2018, Gibbs declared a property dividend of one share of Oliver for every ten shares of Gibbs held by a stockholder. On that date, when the market price of Oliver was $35 per share, there were 180,000 shares of Gibbs outstanding. What NET reduction in retained earnings would result from this property dividend? a. $202,500 b. $630,000 c. $213,750 d. $427,500

a. $202,500

A dividend which is a return to stockholders of a portion of their original investments is a a. liquidating dividend. b. property dividend. c. liability dividend. d. participating dividend.

a. liquidating dividend

The stockholders' equity of Howell Company at July 31, 2018 is presented below: Common stock, par value $20, authorized 400,000 shares; issued and outstanding 160,000 shares $3,200,000 Paid-in capital in excess of par 160,000 Retained earnings 650,000 $4,010,000 On August 1, 2018, the board of directors of Howell declared a 15% stock dividend on common stock, to be distributed on September 15th. The market price of Howell's common stock was $70 on August 1, 2018, and $76 on September 15, 2018. What is the amount of the debit to retained earnings as a result of the declaration and distribution of this stock dividend? a. $ 960,000. b. $1,680,000. c. $1,824,000. d. $ 1,200,000.

b. $1,680,000.

On December 1, 2014, Lester Company issued at 103, five hundred of its 9%, $1,000 bonds. Attached to each bond was one detachable stock warrant entitling the holder to purchase 10 shares of Lester's common stock. On December 1, 2014, the market value of the bonds, without the stock warrants, was 95, and the market value of each stock purchase warrant was $50. The amount of the proceeds from the issuance that should be accounted for as the initial carrying value of the bonds payable would be a. $484,100. b. $489,250. c. $500,000. d. $515,000.

b. $489,250.

On January 1, 2015, Gridley Corporation had 250,000 shares of its $2 par value common stock outstanding. On March 1, Gridley sold an additional 500,000 shares on the open market at $20 per share. Gridley issued a 20% stock dividend on May 1. On August 1, Gridley purchased 280,000 shares and immediately retired the stock. On November 1, 400,000 shares were sold for $25 per share. What is the weighted-average number of shares outstanding for 2015? a. 1,020,000 b. 750,000 c. 477,777 d. 344,444

b. 750,000

Quirk Corporation issued a 100% stock dividend of its common stock which had a par value of $10 before and after the dividend. At what amount should retained earnings be capitalized for the additional shares issued? a. There should be no capitalization of retained earnings. b. Par value c. Fair value on the declaration date d. Fair value on the payment date

b. Par value

The declaration and issuance of a stock dividend larger than 25% of the shares previously outstanding a. increases common stock outstanding and increases total stockholders' equity. b. decreases retained earnings but does not change total stockholders' equity. c. may increase or decrease paid-in capital in excess of par but does not change total stockholders' equity. d. increases retained earnings and increases total stockholders' equity.

b. decreases retained earnings but does not change total stockholders' equity.

On January 1, 2014, Trent Company granted Dick Williams, an employee, an option to buy 400 shares of Trent Co. stock for $30 per share, the option exercisable for 5 years from date of grant. Using a fair value option pricing model, total compensation expense is determined to be $3,600. Williams exercised his option on September 1, 2014, and sold his 400 shares on December 1, 2014. Quoted market prices of Trent Co. stock during 2014 were: January 1 $30 per share September 1 $36 per share December 1 $40 per share The service period is for two years beginning January 1, 2014. As a result of the option granted to Williams, using the fair value method, Trent should recognize compensation expense for 2014 on its books in the amount of a. $4,000. b. $3,600. c. $1,800. d. $0.

c. $1,800.

During 2014, Gordon Company issued at 104 four hundred, $1,000 bonds due in ten years. One detachable stock warrant entitling the holder to purchase 15 shares of Gordon's common stock was attached to each bond. At the date of issuance, the market value of the bonds, without the stock warrants, was quoted at 96. The market value of each detachable warrant was quoted at $40. What amount, if any, of the proceeds from the issuance should be accounted for as part of Gordon's stockholders' equity? a. $0 b. $16,000 c. $16,640 d. $15,808

c. $16,640

On March 1, 2014, Ruiz Corporation issued $1,500,000 of 8% nonconvertible bonds at 104, which are due on February 28, 2034. In addition, each $1,000 bond was issued with 25 detachable stock warrants, each of which entitled the bondholder to purchase for $50 one share of Ruiz common stock, par value $25. The bonds without the warrants would normally sell at 95. On March 1, 2014, the fair value of Ruiz's common stock was $40 per share and the fair value of the warrants was $2.00. What amount should Ruiz record on March 1, 2014 as paid-in capital from stock warrants? a. $55,200 b. $63,900 c. $78,000 d. $75,000

c. $78,000

What effect does the issuance of a 2-for-1 stock split have on each of the following? Par Value per Share Retained Earnings a. No effect No effect b. Increase No effect c. Decrease No effect d. Decrease Decrease

c. Decrease No effect

On September 1, 2017, Valdez Company reacquired 30,000 shares of its $10 par value common stock for $15 per share. Valdez uses the cost method to account for treasury stock. The journal entry to record the reacquisition of the stock should debit a. Treasury Stock for $300,000. b. Common Stock for $300,000. c. Common Stock for $300,000 and Paid-in Capital in Excess of Par for $150,000. d. Treasury Stock for $450,000.

d. Treasury Stock for $450,000