Accounting 201

Scranton company purchased 10,000 shares of its own $5 par value common stock for $10 per share. The company later reissued 5,000 shares for $15 per share. These transactions resulted in a:

$25,000 increase in paid-in capital

Jazzy Corporation's SE section of the balance sheet reports: Common Stock ($10 par value, 50,000 shares authorized, 15,000 shares issued) $150,000; Paid-in Capital in Excess of Par Value-Common $50,000; Retained Earnings, $300,000. How much is the book value per share of common stock?

150,000 50,000 300,000 =500,000/15,000 = 33.33

Bonds with a 6% interest rate were issued when the market rate of interest was 7%. These bonds were issued at:

A discount

Which of the following statements about treasury stock transactions is correct?

A stockholders' equity account is DEBITED when treasury stock is purchased

ALICE

Assets - Debit Liabilities - Credit Income - Credit Capital Equity/Fund Balance - Credit Expenses - Debit

Which of the following statements about treasury stock is correct?

The total number of shares issued does not change when treasury stock is purchased

Par value

an arbitrary value placed on a share of stock at the time the stock is authorized in the corporate charter

The entry to record the declaration and distribution of a stock dividend includes a:

credit to Common Stock and a debit to Retained Earnings

The entry to record the issuance of 1,000 shares of $1 par value common stock at $10 per share includes a:

credit to Paid-in Capital in Excess of Par Value-Common for $9,000

If treasury stock is sold at a price greater than its reacquisition costs, the difference is:

credited to Paid-in Capital from Treasury Stock Transactions

A company should recognize a gain on treasury stock:

in none of the above situations. No gain is recognized on treasury stock transactions

Under the effective-interest method of amortizing bond discount, the interest expense recorded for each semiannual interest payment:

increases over the life of the bond

A stock split

increases, the number of shares outstanding and involves a pro rata reduction in the par value per share

If ending inventory for the year was overstated, but all other financial statement items were properly reported, the calculated inventory turnover ratio would:

indicate that inventory was being turned over fewer times than it actually was

If cost of goods sold for the year was overstated, but all other financial statement items were properly reported, the calculated inventory turnover ratio would:

indicate that inventory was being turned over more times than it actually was

Under the effective-interest method of amortizing bond premium, the interest expense recorded for each semi-annual interest payment:

is equal to the carrying value of the bond times the market rate of interest for each semi-annual period

A stock dividend

results in a transfer of retained earnings to contributed capital

When a stock dividend (on par value stock) is declared and issued

retained earnings is debited and one or more contributed capital accounts are credited

When a stock dividend is declared and issued

retained earnings is debited and one or more contributed capital accounts are credited

If bonds are issued at a discount:

the amortization of the discount will increase interest expense

Under the effective-interest method, if bonds are issued at a premium:

the amount of interest expense decreases each interest period as the bonds move towards maturity value

A bond will sell at a premium when

the contract rate is greater than the effective rate