Additional Paid-in Capital on Common Stock Stock Subscribed Xx xx d. Building Di

Question

Additional Paid-in Capital on Common Stock Stock Subscribed Xx xx d. Building Discount on Common Stock Common Stock, $10 par 6. A company is exchanging its common stock for land in valued based upon the a. fair value of the stock b. fair value of the land a nonmonetary exchange. This transaction should be fair value of the stock issued and the land received d.) fair value of the stock issued and the land received, whichever is more reliable 7. Werling Co. had 10,000 shares of $8 par common stock outstanding just prior to a stock split. The stock wa split two-for-one and the par value was reduced to $3. Which entry correctly records this stock split? a. Common Stock, $8 par 80, 000 Common Stock, $3 par 80,000 b. Common Stock, $8 par 80,000 Common Stock, $3 par Additional Paid-in Capital from Stock Split 60,000 20,000 c. Common Stock, $8 par 80,000 Common Stock, $3 par Gain on Stock Split 60, 000 20,000 d. Common Stock, $8 par 80,000 Common Stock, $3 par Capital Surplus 60,000 20,000 8. Which of the following methods should be used to account for the conversion of prefered stock to common stock? Book Value Market Value I. Yes II. Yes Yes Yes No IV. No a. d. IV Continued)

Explanation / Answer

6. The answer is option “d” – fair value of the stock issued and the land received, whichever is more reliable.

7. The answer is option “b” –

Explanation:

Two-for-one split will make the no. of shares = 10,000*2 = 20,000 shares

Amount in common stock account = 20,000 shares*$3 par = $60,000

Thus additional paid in capital = 80,000-60,000 = 20,000

8. The answer is option "a" - I.

This is because conversion ratio is divided into the preferred share’s parity price to determine the conversion price. It is based on book value and not market value.

Common stock, $8 par 80,000.00 Common stock, $3 par 60,000.00 Additional paid in capital from stock split 20,000.00

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