HW 3

The residual interest in a corporation belongs to the

common stockholders

Carr Corporation retires its 500k face value bonds at 105 on January 1, the following payment of interest. The carrying value of the bonds at the redemption date is 518725. The entry to record the redemption will include a

debit of 18725 to premium on bonds payable

In January 2017, Finley Corporation, a newly formed company, issued 10,000 shares of its $10 par common stock for $15 per share. On July 1, 2017, Finley Corporation reacquired 1,000 shares of its outstanding stock for $12 per share. The acquisition of these treasury shares

decreased total stockholders' equity

Stockholders' equity is generally classified into two major categories:

earned capital and contributed capital

The December 31, 2017, balance sheet of Hess Corporation includes the following items: 9% bonds payable due December 31, 2026$5,000,000 Unamortized premium on bonds payable135,000 The bonds were issued on December 31, 2016, at 103, with interest payable on July 1 and December 31 of each year. Hess uses straight-line amortization. On March 1, 2018, Hess retired $2,000,000 of these bonds at 98 plus accrued interest. What should Hess record as a gain on retirement of these bonds? Ignore taxes.

gain = (5m + 135k - (135k/18))*(2m/5m) = 93k

Berry Corporation has 100,000 shares of $10 par common stock authorized. The following two transactions took place during 2017, the first year of the corporation's existence. 1st transaction: Berry issued 20,000 shares of common stock for $13.50 per share. 2nd transaction: Berry issued additional 20,000 shares of common stock in exchange for a patent. Berry cannot readily determine the fair value of the stock, but it determines the fair value of the patent is $300,000. At the end of the Berry's first year, total paid-in capital (contributed capital) amounted to

20k*13.50 = 270k + 300k = 570k

Presented below is information related to Hale Corporation: Common Stock, $1 par $3,500,000 Paid-in Capital in Excess of Par—Common Stock 550,000 Preferred 8 1/2% Stock, $50 par 2,000,000 Paid-in Capital in Excess of Par—Preferred Stock 400,000 Retained Earnings 1,500,000 Treasury Common Stock (at cost) 150,000 Reference: Ref 15-1 The total stockholders' equity of Hale Corporation is

3.5M = 530k + 2M + 400k - 150k = 7800000

Presented below is information related to Hale Corporation: Common Stock, $1 par $3,500,000 Paid-in Capital in Excess of Par—Common Stock 550,000 Preferred 8 1/2% Stock, $50 par 2,000,000 Paid-in Capital in Excess of Par—Preferred Stock 400,000 Retained Earnings 1,500,000 Treasury Common Stock (at cost) 150,000 Reference: Ref 15-1 The total paid-in capital (cash collected) related to the common stock is

C/S + Aplc = C/S 3.5M + 550k = 4050000

The preemptive right allows stockholders the right to vote for directors of the company.

False

Norton Company issues 4,000 shares of its $5 par value common stock having a fair value of $25 per share and 6,000 shares of its $15 par value preferred stock having a fair value of $20 per share for a lump sum of $205,000. What amount of the proceeds should be allocated to the preferred stock?

P/S = 6M*20 = 120k/220k = 55% P/S = 205k * 120K/220 = 11818

At December 31, 2020 the following balances existed on the books of Foxworth Corporation: Bonds Payable$6,000,000 Discount on Bonds Payable840,000 Interest Payable150,000 If the bonds are retired on January 1, 2021, at 102, what will Foxworth report as a loss on redemption?

RP = 6M*102% = 6120000 CV = 6M - 840k = 5160000 6120000 - 5160000 = 960000

A corporation is incorporated in only one state regardless of the number of states in which it operates

True

Companies should record stock issued for services or noncash property at either the fair value of the stock issued or the fair value of the consideration received, whichever is more clearly determinable.

True

The generally accepted method of accounting for gains or losses form the early extinguishment of debt treats any gain or loss as

a difference between the reacquisition price and the net carrying amount of the debt which should be recognized in the period of redemption