Exam 15: Contributed Capital

Under the par value method of accounting for treasury stock, the treasury stock is reported on the balance sheet as a deduction from

Which one of the following equations is accurate?

In the financial statements, dividends in arrears on cumulative preferred stock should be

Which of the following methods should be used to account for the conversion of preferred stock to common stock?

Which of the following share option plans would involve the creation of a liability account over the life of the plan?

Exhibit 15-9 Groundcover, Inc. had never had a treasury stock transaction prior to 2016. It experienced the following treasury stock transactions during 2016: 4/1/2016: Reacquired 1,000 shares of its own $5 par common stock, originally sold at $12 a share, for $10 a share. This was the first time that Groundcover had reacquired its own stock. 4/8/2016: Reissued 400 shares at $8 a share. 5/2/2016: Reissued 500 shares at $13 a share. 5/10/2016: Retired the remaining 100 shares. Assume the cost method is used. -Refer to Exhibit 15-9. The entry to record the reissuance of 400 shares on 4/8/2016 would include a

Several years ago, Walther, Inc. issued 12,000 shares of $40 par preferred stock at $60. Each share of preferred was convertible into three shares of $10 par common stock. On January 10, 2016, one-half of the preferred stock was converted. Required: Indicate the credits that should be made in the entry to record this conversion.

What are share based compensation plans?

On January 1, 2016, Biggs Company granted a performance-based stock option plan to 40 executives to buy a maximum of 3,000 shares each of its $10 par common stock at $30 a share. The fair value per option is $8. The terms of the plan, which has a three-year service and vesting period, are based on the following scale: Biggs expects an annual employee turnover rate of 3%, and the company initially anticipates an increase in sales during the service period of 18%. By the end of 2019, the actual sales increase is 17%. Required: a. Compute the estimated total compensation cost. b. Compute the annual compensation expense for each of the three years. c. Prepare the January 1, 2016, entry when 10 executives exercise their options.

Preferred shareholders share with common shareholders in any "extra" dividends when the preferred stock is

The legal capital of a corporation may be any of the following except

Which of the following is not a reason for a corporation to acquire treasury stock?

On January 1, 2016, sixty executives are offered a fixed compensatory stock option plan in which each of them will receive options to buy 5,000 shares of $10 par common stock at $30 a share. On the grant date, the fair value per option is $7.50. There is a three-year service period and an estimated annual employee turnover rate of 3%. Required: a. Compute the expected total compensation cost. b. Compute the compensation expense for 2016. c. Prepare the journal entry to record the exercise of options by six of the executives on January 1, 2019.

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, 2016?

Assume common stock is issued to employees as a result of exercising stock purchase rights issued under a noncompensatory share purchase plan. At what value does the company record that stock in its books?

The accounting method that is used for share appreciation rights SARs) compensation plans is similar to the accounting procedures that can be used for

On January 1, 2016, the Jim Corporation granted 50,000 stock appreciation rights SARs) to the company's president, Jim Darling. Jim will be entitled to receive cash or common stock or some combination of cash and common stock for the difference between the quoted market price at the date of exercise and a $20 option price per SAR. It is assumed that Jim will elect to receive cash when he exercises his SARs. The service period is three years, and he may exercise his SARs during the period January 1, 2019, through December 31, 2020. The market prices per share of Jim Corporation's common stock are as follows: On December 31, 2020, Jim Darling exercises his 5,000 SARs and elects to receive cash. Required: a. Prepare the journal entries to record each year's compensation expense related to the SARs. b. Prepare the December 31, 2020 entry to record the exercise of the 50,000 SARs.

Which of the following is not a characteristic of the corporate form of business entity?

Which one of the following statements is not true with regard to employee compensatory share option plans?

If a company does not maintain its treasury stock records on a specific identification basis, which of the following approaches may be used to record a reduction in the treasury stock account when the stock is reissued?