16. A premium on common stock: (a) Is the amount paid in excess of par by purcha

Question

16. A premium on common stock: (a) Is the amount paid in excess of par by purchasers of newly issued stock (b) Is the difference between par value and issue price when the amount paid is below par (c) Represents profit from issuing stock (d) Represents capital gain on sale of stock Is prohibited in most states 17. A company issues at par 7% bonds with a par value of $500,000 on June 1, which is 5 months after the most recent interest date. How much total cash interest is received on May 1 by the bond issuer? (a) $0 (b) $2,916.66 (c) $100,000.00 (d) $14,583.33 (e) $35,000.00 18. A corporation was formed on January 1. The corporate charter authorized 100,000 shares of $10 par value common stock. During the first month of operation, the corporation issued 300 shares to its attorneys in payment of a $5,000 charge for drawing up the articles of incorporation. The entry to record this transaction would include: (a) A debit to Organization Expenses for $3,000 (b) A debit to Organization Expenses for $5,000 (c) A credit to Common Stock for $5,000 (d) A credit to Contributed Capital in Excess of Par Value, Common Stock for $5,000 (e) A debit to Contributed Capital in Excess of Par Value, Common Stock for $2,000 19. A company issues at 9% bonds at par with a par value of $100,000 on April 1, which is 4 months after the most recent interest date. How much total cash interest is received on April 1 by the bond issuer? (a) $750 (b) $5,250 (c) $1,500 (d) $3,000 (e) $6,000 20. Stock that was reacquired by the company and is still held by the issuing corporation is called: ((a) Capital stock (b) Treasury stock (c) Redeemed stock (d) Preferred stock I need these as soon as possible

Explanation / Answer

16)a) Is the amount paid in excess of par by purchasers of newly issued stock 17)d)A company issues at par 7% bonds with a par value of $500,000 on June 1, which is 5 months after the most recent interest date. How much total cash interest is received on May 1 by the bond issuer? This looks like a trick question. When the bonds are issued on June 1, the bond issuer will receive five months of accrued interest: 500,000 x 7% x 5/12 = 14,583. But after that, including May 1, the bond issuer is the one paying the interest not receiving it. 18)The answer is a debit to organization expenses for $5,000 A debit to organization expense of $3,000 is not enough to fully pay the attorneys The credit to common stock would be $3,000 (300 shares x $10 par value) A credit to Contributed Capital in Excess of Par Value, Common Stock for $5,000 is too much A debit to Contributed Capital in Excess of Par Value, Common Stock for $2,000 is incorrect. The account would be CREDITED, not DEBITED. 19)d)3000$ 20) b)treaury stock

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