31. If Lantz Company issues 5,000 shares of $5 par value common stock for $210,0

Question

31. If Lantz Company issues 5,000 shares of $5 par value common stock for $210,000, the a A) Common Stock will be credited for $25,000. B) Paid-in Capital in Excess of Par Value will be credited for $25,000. C) Paid-in Capital in Excess of Par Value will be credited for $210,000. D) Cash will be debited for $185,000. 32. If common stock is issued for an amount greater than par value, the excess should be e A) Cash. B) Retained Earnings. C) Additional Paid-in Capital Legal Capital. D) 33. A corporation purchases 15,000 shares of its own $20 par common stock for $35 per at cost. What will be the effect on total stockholders' equity? A) Increase by $525,000 B) Decrease by $300,000. C) Decrease by $525.000. D) Decrease by $225,000. 34. The primary purpose of the statement of cash flows is to A) provide information about the investing and financing activities during a perio B) prove that revenues exceed expenses if there is a net income. C) provide information about the cash receipts and cash payments during a perio D) facilitate banking relationships. 35. Assume that the Fitzgerald Corporation uses the indirect method to depict cash flo if at all, accounts receivable collected would be classified on the statement of cash A) Operating activities section. B) Investing activities section. C) Financing activities section. D) Does not represent a cash flow. 36. Assume that the Fitzgerald Corporation uses the indirect method to depict cash f if at all, long-term debt retired with cash would be classified on the statement of A) Operating activities section. B) Investing activities section C) Financing activities section. D) Does not represent a cash flow.

Explanation / Answer

31. A

Company issued 5000 shares of $5 at 210,000 so Cash will be Debited by 210,000; Common stock will be credited by (5000*5) 25,000 and Paid in capital in excess of par will be credited by (210,000 - 25,000) = 185,000

So only A part is correct, all other are false.

32. Additional Paid in capital

If the shares are issued at the value more than its face value then excess over it goes to Additional paid in capital and comes under Equity section in the balance sheet.

33. Decrease by 525,000

If company purchases its own 15,000 shares of $20 par at $35 per share then the sharecapital will decrease by

$35 * 15,000 shares = 525,000,

As company purchased its own shares at $35 so on one hand cash will decrease by 525,000 and Treasury stock will increase by 525,000 and Treasury stock is deducted from Shareholder's fund so Shareholder'sfund will decrease by 525,000

34. C

Cash flow statement is a statement which shows the flow from different activities i.e. Operating, Investing and financing.

35. A

Collection of Accounts receivable is a operating activity for business organisation.

36. C

Long term debt is a part of Financing Activity and any raise of Long term debt or Repayment of Long term debt comes in Financing activity.

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