1a.) The entry to record the purchase of 5,000 shares of a corporation\'s own $2
ID: 2470102 • Letter: 1
Question
1a.) The entry to record the purchase of 5,000 shares of a corporation's own $20 par common stock at $25, paid in cash, includes a debit to:
Paid-In Capital in Excess of Par
Treasury Stock
Common Stock
Retained Earnings
1b.) What is the total stockholders' equity based on the following data?
Common Stock
$800,000
Excess of Issue Price Over Par
375,000
Retained Earnings (deficit)
(50,000)
$1,225,000
$1,125,000
$1,175,000
$1,100,000
1c.) A corporation has 10,000 shares of $10 par value stock outstanding. If the corporation issues a 2-for-1 stock split, the number of shares outstanding after the split will be:
10,000
20,000
200,000
5,000
1d.) The net effect to a corporation of the declaration and payment of a cash dividend is to:
decrease assets and decrease stockholders' equity
decrease liabilities and decrease stockholders' equity
increase stockholders' equity and decrease liabilities
increase assets and increase stockholders' equity
1e.) The charter of a corporation provides for the issuance of 100,000 shares of common stock. Assume that 50,000 shares were originally issued and 5,000 were subsequently reacquired. What is the amount of cash dividends to be paid if a $1 per share dividend is declared?
$50,000
$5,000
$100,000
$45,000
Paid-In Capital in Excess of Par
Treasury Stock
Explanation / Answer
1a) Treasury Stock. The entry passed is debit treasury stock and credit cash.
1b) $1125000 . Common stock, Excess of Issue Price Over Par and retained earnings all form a part of stockholders equity. Negative retained earnings reduce the stockholders equity.
1c) 20000 shares. Because 10000 shares are outstanding. 2 shares is issued for every 1 shares. Therefore instead of 10000 shares now 2*10000 i.e. 20000 shares will be outstanding
1d) decrease assets and decrease stockholders' equity. This is because when dividend is paid cash (asset) decreases and retained earnings (stockholders equity) decreases.
1e) $45000 . Total shares on which dividend is to be paid is 50000 - 5000 = 45000 shares
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