Midterm Examination Answers

MIDTERM EXAMINATION carrying value (book value) of the
nonmonetary assets transferred

23. stock dividend
1. proprietorship and partnership 24. fair value of the shares issued.
2. the owners of a corporation have 25. addition to capital stock.
unlimited liability 26. that there is no effect on total
3. all of these are basic rights of a stockholders' equity.
common stockholder 27. book value per share.
4. the right to receive a dividend 28. treasury common stock.
5. the right to vote 29. are not paid or disclosed
6. the dollar amount of legal capital is 30. note disclosure
established by securities exchange 31. $600,000
commission paid-in capital in excess of par: 30,000 x
7. the fair value of the noncash asset ($30 - $10) = $600,000
8. the purchase of treasury stock 32. credit to common stock of $6,000
9. credit to dividends payable of common stock: $2 x 3,000 = $6,000
$40,000 33. credit to paid-in capital in excess
10. share proportionately in any new of par, common stock of $95,000
issues of stock of the same class paid-in capital in excess of par,
11. a claim against a portion of the common stock: $100,000 - (5,000 x
total assets of an enterprise $1) = $95,000
12. contributed capital and 34. treasury stock of $36,000
appropriated capital treasury stock: $18 x 2,000 = $36,000
13. either the proportional method or 35. paid-in capital, treasury stock of
the incremental method $4,000
14. par value of the shares issued. paid-in capital, treasury stock: 1,000 x
15. (any of the same two choices) ($22 - $18) = $4,000
16. decreased total stockholders' 36. debit to retained earnings of $2,000
equity paid-in capital, treasury stock
balance: 1,000 x ($22 - $18) = $4,000
17. issued but not outstanding shares.
18. paid-in capital from treasury stock. retained earnings: [1,000 x
19. requires that dividends not paid in ($18 - $12)] - $4,000 = $2,000
any year must be made up in a 37. $30,000 decrease
later year before dividends are decrease in equity: 3,000 x $50 =
distributed to common $150,000
shareholders
20. purchase of treasury stock. increase in equity: 3,000 x $40 =
21. outstanding. $120,000
22. the accounting for a property
dividend should be based on the
total change: 3,000 ´ $50 ´ .06 = $9,000
$150,000 - $120,000 = $30,000
decrease ($9,000 – $7,500) + $9,000 =
$10,500
38. $15,000
48. $108,000 $ 81,000
divided paid to preferred
stockholders: $30 x 5% x 10,000 = $90,000 ÷ $10) ´ $21 = $189,000
$15,000
39. $143,770 [$21 – ($90,000 ÷ 10,000)] ´ 9,000 =
$108,000
dividends declared:
$128,700 + $72,820 - x = $57,750 x = $189,000 – $108,000 = $81,000.
$143,770
40. $236,364
49. $1,500,000. (300,000 ´ $7) – [($7 –
(10,000 x $25) + (15,000 x $20) =
$550,000 $5) ´ 300,000] = $1,500,000.
50. $216,000
($250,000 ÷ $550,000) x $520,000 =
$236,364. (180,000 ÷ 10) ´ $21 = $378,000
$378,000 – [$378,000 – ($180,000 ´
41. $380,000. 18/20)] = $216,000.
42. $141,818 51. $8,000,000

(80,000 ´ $50) + $4,000,000 =
[(6,000 ´ $25) ÷ [(6,000 ´ $25) + $8,000,000.
(9,000 ´ $20)]] ´ $312,000 = 52. $76,000
$141,818. $95,000 – $10,000 – (1,500 ´ $6) =
$76,000.
43. $240,000 53. $130,000
($60 – $52) ´ 30,000 = $240,000 $250,000 – (100,000 ´ $5 ´ .08 ´ 3) =
44. treasury stock for $80,000 and $130,000.
paid-in capital from treasury stock 54. $105,000
for $28,000. 100,000 ´ $5 ´ .08 ´ 3 = $120,000 >
4,000 ´ $20 = $80,000; 4,000 ´ $7 = $105,000.
$28,000. 55. $150,000
45. $705,000 8% ´ $1,000,000 = $80,000
$700,000 + (2,000 ´ $5) – (500 ´ $10) (current year)
= $705,000. 56. $160,000.
46. $1,650,000.
30,000 x $55 = $1,650,000 common stock
47. $ 10,500
$1,000,000 ´ 6% = 61. $2,240,000
$60,000 (current year)
$1,000,000 ´ $8,240,000 – (80,000 × 3 × $25) =
10%*= 100,000 $2,240,000
(participating)
62. $3,000
$160,000
*$270,000 – $60,000 – ($500,000 ´ preferred stock dividend: 10,000 x
6% × 2) = $150,000 $10 x 6% = $6,000
common stock dividend: $9,000 -
$6,000 = $3,000
$150,000
————-- = 10%. 63. $46,000
$1,500,000 preferred stock dividend: 10,000 x
$10 x 6% x 3 = $18,000
57. $204,000 common stock dividend: $64,000 -
$300,000 – ($600,000 ´ 8% × 2) = $18,000 = $46,000
$204,000
64. $58,000
58. $1,125,000
preferred stock dividend: 10,000 x
$10 x 6% = $6,000
ps shares converted 15,000
common stock dividend: $64,000 -
conversion 3 $6,000 = $58,000
total cs conversion -
45,000
shares 65. $24,000
par value of cs 25 preferred stock dividend: 10,000 x
$10 x 6% x 4 = $24,000
credited to cs 1,125,000
59. $6.00.
new number of shares after split =

200,000 / 2 * 5 = 500,000
new par value = total equity (200,000
x 15) = 3,000,000 / 500,000 = 6.00
60. 500,000.

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MIDTERM EXAMINATION carrying value (book value) of the

nonmonetary assets transferred

42. $141,818 51. $8,000,000

new number of shares after split =

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