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1. From the balances shown on the End-of-Period Trial Balance, what is the value of total Stockholders’ Equity? $______________
2. When common stock is sold for cash, Stockholder Equity A. increases B. decreases C. does not change ______________
3. When treasury stock is sold for more than its cost (Transaction 6), identify by number which account will be credited for the difference between selling price and cost credited? A. 301 B. 303 C. 305 D. 310 E. 315 ______________
4. What was the purchase price of the land acquired on Transaction 8? $______________
5. When treasury stock is sold at a price less than its cost basis, and Account Number 305, Additional Paid-In Capital: Treasury Stock has a $0.00 balance, what account will be debited? A. Cash B. Treasury Stock C. Interest Expense D. Retained Earnings E. None of the above ______________
6. When treasury stock is sold at a price that is $1,000 less than the cost basis of the stock, and the Additional Paid-In Capital, Treasury Stock account credit balance is only $200, the Retained Earnings account will be: A. debited for $200 B. debited for $800 C. debited for $1,000 D. credited for the total value of the Treasury Stock. E. credited for $200 ______________
7. When treasury stock is reissued, the total value of Stockholders’ Equity will A. increase B. decrease C. remained unchanged ______________
8. When Treasury Stock is purchased: A. cash is debited. B. total equity increases. C. the Treasury Stock account is credited. D. revenues almost always increase. E. None of the above ______________
9. What type of account is Additional Paid-In Capital, Treasury Stock? A. Asset B. Liability C. Stockholders’ Equity D. Revenue E. Expense ______________
10. When a cash dividend is declared and paid, Stockholders’ Equity A. increases B. decreases C. does not change
Accounting Entries Shares Debit $ 60,000 Credit 1 Cash 10,000 COMST Reserves & Surplus $ 50,000 $ 10,000 2Cash $ 36,000 8,000 NPRCS $ 36,000 3 Cash $ 40,000 400 PREST $ 40,000 4 MNOTE Interest $10,000 $ 800 Cash $10,800 5 TRSTK $ 2,000 500 Cash $ 2,000 6 Cash $ 700 100 TRSTK Profit $ 400 $ 300 $ 300 $ 100 100 7 Cash Loss TRSTK $ 400 8 Land $ 1,10,000 12,000 COMST MNOTE $ 60,000 $ 50,000 9 Cash $5,000 1,000 NPRCS $ 5,000 $ 600 $ 600 300 10 Cash Loss TRSTK $ 1,200 11 Cash $ 21,000 3,000 COMST Reserves & Surplus $15,000 $ 6,000 12 Reserves & Surplus $ 6,000 CASHD $ 6,000Explanation / Answer
(1) Share holder's Equity = $215800, shareholder equity = common stock + preferrence stock + reserve and surplus
Transaction Treasury Common Preferrence Reserve and surplus
1 50000 10000
2 36000
3 40000
5 (2000)
6 400 300 7 400 (100)
8 60000
9 5000
10 1200 ( $400)=(300-100)-600
11 15000 6000
12 (6000)
$0 $166000 $40000 $9800
Note:- ( $400)=(300-100)-600 , from prevoius treasury stock sale)
(2) A - Increase, when stock is exchanged with or sold for cash, cash comes in, and common stock (equity value
) increases
Journal entry:-
cash Dr.$
To common stock
(4) Land =$110000 , ( common stock = 12000 share * $5 = $60000) and mortgage = $50000
(5) D. Retained Earnings ,If the loss on sale of treasury stock less than the cost basis of treasury stock ,remaining balance(selling price - cost ) is transferred to " Retained Earning"
(6) B. debited for $800 ,
cash (1200-1000) Dr.$200
Additional paid in capital-treasury Dr.$200
Retained Earning Dr.$ 800
To Treasury stock( 300 shares * $4 par value) $1200
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