1) The Speed Company issues an additional 10 000 preferred share for cash at $45
ID: 2524314 • Letter: 1
Question
1)
The Speed Company issues an additional 10 000 preferred share for cash at $45.00 per share. The shares were issued with $30.00 payable on application and $15.00 on allotment. The entry to record the transaction will result in a debit to cash for $450,000.00 and credit(s) to:
a. preferred share for $450,000.00
b. preferred share for $300,000.00 and allotment for 150,000shares
preferred share for $300,000.00 and retained earnings for $150,000.00
d. paid-up capital from ordinary shareholders for $300,000.00 and allotment for $150,000.00
2)
Preda Ltd began operations on 1 October 2012. He issued 3 000 ordinary shares on 31 December 2012 and repurchased 500 shares.
On 1 June 2013, Preda Ltd declared a 2-for-1 share split. As a result of this share split:
a.shareholders' equity increased
b. total shareholders' equity remained the same
c. assets decreased
d. shareholders' equity decreased
3)
Murton Industries Limited reported the following information on its recent statement of financial position.
Ordinary shares: 75 000 shares issued
What is the effect on Murton's accounting equation of issuing 2 000 additional shares at $12 per share?
a. Equity increases $24 000
b. Assets decrease $24 000
c. Equity decreases $24 000
d. Assets increase $10 000
Explanation / Answer
ans 1 d. paid-up capital from ordinary shareholders for $300,000.00 and allotment for $150,000.00 it is credited to paid up capital 10000*$30=$300000 ans for allotment 10000*15=$150000 ans 2 b. total shareholders' equity remained the same As 2:1 stock spilt doubles the share but the par value becomes half hence there is no effect on equity ans 3 option a Equity increases $24 000 As additional shares are issued for cash there is increase in equity 2000*$12= $24000
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