Exam 15: Contributed Capital

Advance Medical Imaging, Inc. reacquired 2,000 shares of its $5 par common stock at $15 a share. The stock originally sold for $10 a share. Required: a. Prepare the journal entry to record the reacquisition under the 1) cost method 2) par value method b. Prepare the journal entry to record the reissuance of 500 shares at $18 a share under the 1) cost method 2) par value method c. Prepare the journal entry to record the reissuance of 1,000 shares at $12 a share under the 1) cost method 2) par value method d. Prepare the journal entry to record the retirement of the remaining 500 shares under the 1) cost method 2) par value method

What conditions must be met in order for a share purchase plan to be noncompensatory?

When accounting for a fixed compensatory share option plan, a company must record which of the following on the date of grant?

A corporation acquired a copyright by issuing 1,000 shares of $5 par common stock. At the time of the exchange, the stock was selling for $40 per share. The copyright had a carrying value of $18,000 to the author. The purchasing corporation should assign to the copyright a value of

Exhibit 15-7 On January 1, 2016, 70 executives were granted a performance-based share option plan that would award them each a maximum of 300 shares of $5 par common stock for $12 a share based on the increase in sales over the next three years. The fair value per option on the grant date was $16. The award table is as follows: The company estimates that the sales increase will be 22% and that the annual employee turnover rate will be 2%. -Refer to Exhibit 15-7. The compensation expense for 2016 is to the nearest dollar)

A corporation's legal capital

If a company has 75,000 shares of treasury stock, 520,000 shares outstanding, and 1,500,000 shares authorized, how many shares are issued?

State laws established the concept of legal capital which is designed to protect the corporation's creditors by restricting the distribution of shareholder's equity to shareholders.

Universities, hospitals, and churches are examples of which type of corporation?

Exhibit 15-8 On January 1, 2016, Margarita Company granted share appreciation rights SARs) to the president, which permitted her to receive cash or stock for the difference between the quoted market price and $50 for 2,000 shares of the company's stock on the exercise date. The service period ends on December 31, 2018, and the rights must be exercised by December 31, 2021. Assume that on December 31, 2019, the president exercises all of her rights and receives cash. Using an options pricing model, the estimated fair values of the SARs were as follows: -Refer to Exhibit 15-8. What is the compensation expense related to the SARs for the year ending December 31, 2018?

Since its organization in January of 2016, Mars Corp. began with the issuance of 15,000 shares of $5 par, cumulative, 8% preferred stock and 15,000 shares of common stock shares, which are still outstanding. It declared its first dividend of $40,000 at the end of 2018. This means that

There is disagreement among accountants as to how subscriptions receivable should be reported on the balance sheet. Required: Describe three different ways in which subscriptions receivable can be reflected on the balance sheet, and provide a justification for each alternative.

Exhibit 15-5 On January 1, 2016, Roberts Company adopts a compensatory share option plan and grants 40 executives 1,000 shares each at $30 a share. The fair value per option is $7 on the grant date. The company estimates that its annual employee turnover rate during the service period of three years will be 4%. -Refer to Exhibit 15-5. At the end of 2017, the company estimates that the employee turnover will be 5% a year for the entire service period. The compensation expense for 2017 will be Round your answer to the nearest whole dollar.)

Trevor had outstanding 40,000 shares of $30 par convertible preferred stock that had been sold at $50 a share. One- fourth of these shares were converted into common stock at the stated ratio of four shares of $5 par common stock now selling at $15 a share) for each share of preferred stock. Required: a. Record the conversion of preferred into common stock. b. Use the same information as in requirement a)except assume that each share of preferred stock is convertible into two shares of $35 par common stock now selling at $40 a share). Record this conversion of preferred into common stock. c. Why did Trevor not have common stock converted into preferred stock?

Exhibit 15-2 Lawrence, Inc., entered into a subscription contract with several subscribers that calls for the purchase of 2,000 shares of $5 par common stock for $15 a share. The contract calls for a 20% down payment and specifies that any amounts not paid within the contract period will be forfeited in full. -Refer to Exhibit 15-2. The initial entry to record this subscription and the down payment would include:

How will shareholders' equity and net income be affected by the issuance of stock purchase rights to employees under a noncompensatory share purchase plan?

For a compensatory share option plan, a formal journal entry or entries would be required for which of the following dates?

Exhibit 15-6 On January 1, 2016, 50 executives were given a performance-based share option plan that would award them with a maximum of 300 shares of $10 par common stock for $20 a share. On the grant date, the fair value of an option was $16.50. The number of options that will vest depends on the size of the annual average increase in sales over the next three years according to the following table: On the grant date, the company estimates the annual average sales increase will be 14%. -Refer to Exhibit 15-6. In 2017, the company determined that the actual annual average increase was 16%. The compensation expense for 2017 will be

When a company acquires treasury stock, what effect does this transaction have on earnings per share and legal capital, respectively?

Sully Sports Cars Co. entered into a subscription contract with various investors. The terms were as follows: · 2,000 shares of $5 par common at $24. · $10 down payment per share; two subsequent payments of $7 each. Required: a. Record the subscription and the receipt of the down payment. b. The first subsequent $7 payment was received from all subscribers. c. When the final $7 payment was due, 90% of the final total amount due was received and stock was issued. Record this receipt and stock issuance. d. The remaining 10% of the final payment was not received. According to contract provisions, half of any previous payments should be returned to the subscriber with the remaining half forfeited by the subscriber. Record the entry related to the default.