Maritime Corp. is a junior mining company listed on the TSX. The common share price of Maritime fluctuates in value. Recent swingswent from a high of $12 to a low of $0.40. Maritime issued stock options on 1 September 20X5 to a consultant, in exchange for aproject completed over the last year. The consultant estimated her time was worth $31,000, but the company estimated that it couldhave had the necessary work done for about $25,000 cash. The options specified that 5,000 common shares could be bought for$0.30 per share at any time over the next 10 years. The market price of common shares was $2.00 on the day the options wereissued. At the same time options were issued to the consultant, identical options were issued to the company lawyer for work done todate. An option pricing model valued each set of stock options at $28,000.Required:1. Provide journal entries to record issuance of the two sets of options. (If no entry is required for a transaction/event, select "Nojournal entry required" in the first account field.)Journal entry worksheet<1 2Record the entry for granting stock rights towards Consulting expense.Note: Enter debits before credits.Transaction1Journal entry worksheet< 1 2General JournalRecord the entry for granting stock rights towards legal expense.Note: Enter debits before credits.Transaction2General JournalDebit CreditDebit Credit> 2. Assume that two years after issuance, when the market price of the shares was $10, the consultant exercised her options. Providethe appropriate entry. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)View transaction listJournal entry worksheet1Record the entry for exercising the stock rights.Note: Enter debits before credits.Transaction1View transaction listGeneral Journal3. Assume that 10 years after issuance, when the market price of the shares was $0.10, the lawyer's options expired. Provide the entry,if any. (If no entry is required for a transaction/event, select " o journal entry required" in the first account field.)Journal entry worksheet< 1Record the entry for the expiration of stock rights.Note: Enter debits before credits.Transaction1Debit CreditGeneral Journal>Debit Credit

Journal entry: - Entries recorded in the journal book are known as journal entries. Journal is the…

Answered: Maritime Corp. is a junior mining…

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter26: Mergers And Corporate Control

Section: Chapter Questions

Problem 7MC

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Bullant Inc. has decided to go public and has sold 2 million of its shares to its underwriter for $20 per share. The underwriter then sold them to the public for $22 each. Bullant also encountered $0.5 million in administrative fees. Soon after the issue, the stock price rose to $25. Find Bullant s total cost of this issue including any underpricing.
JAG Manufacturing Company produces and sells one main product. There is significant seasonality in demand, and the unit price is quite high. As a result, during the heavy selling season, JAG generates cash that is idle for a few months. The company uses this cash to acquire investments. The following transactions relate to JAG’s investments during 2012: Mar. 15 Purchased 1,200 shares of Gates Corporation stock at $25 per share, plus brokerage fees of $815. This stock is classified as trading. Apr. 1 Purchased $45,000 of 10% bonds of Micro Company. This investment is classified as available-for-sale. June 3 Received a cash dividend of $1.50 per share on the Gates stock. Oct. 1 Received a semiannual interest payment of $2,250 on the Micro bonds. 10 Sold 480 shares of the Gates stock at $32 per share less a $500 brokerage fee. Dec. 31 Recorded $1,125 of interest earned on the Micro bonds for the period October 1, 2012, through December 31, 2012. 31 The market price of the Gates stock was…
The ABC Corporation received subscription for 9,000 ordinary shares at P40/share, where P35 is the par value and received 40% downpayment. A month after 3,600 of said shares were in full while the rest paid an additional P20/share. By the end of the year, 500 of said subscribers were not able to pay and were declared as delinquent. How much would be debited as Receivable from highest bidder?
On October 17, 2021, LILAC Corporation exchanged 20,000 shares of its ₱200 par value stock for land. A few months ago, the land was appraised by an independent appraiser at ₱5,000,000. The land had an initial cost of ₱4,500,000. LILAC is currently trading at the stock exchange at ₱300. How much should be credited to Share Premium upon the issuance of the shares? Choose answer, either a or b. Show solution in good accounting form. a.) ₱ - 0 - b. ) ₱ 2,000,000
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On October 1, 2018, Farmer Fabrication issued stock options for 100,000 shares to a division manager. Theoptions have an estimated fair value of $6 each. To provide additional incentive for managerial achievement,the options are not exercisable unless Farmer Fabrication’s stock price increases by 5% in three years. Farmerinitially estimates that it is not probable the goal will be achieved. How much compensation will be recorded ineach of the next three years?
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Faith Evans Corporation is a regional company which is an SEC registrant. The corporation's securities are thinly traded on NASDAQ. Faith Evans Corp. has issued 10,000 units. Each unit consists of a $500 par, 12% subordinated debenture and 10 shares of $5 par common stock. The units were sold to outside investors for cash at $880 per unit. Prior to this sale, the 2-week ask price of common stock was $40 per share. Twelve percent is a reasonable market yield for the debentures, and therefore the par value of the bonds is equal to the fair value. Instructions a. Prepare the journal entry to record Evans’ transaction, under the following conditions. 1. Employing the incremental method. 2. Employing the proportional method, assuming the recent price quote on the common stock reflects fair value. b. Briefly explain which method is, in your opinion, the better method.
On October 1, 2016, Farmer Fabrication issued stock options for 100,000 shares to a division manager. The options have an estimated fair value of $6 each. To provide additional incentive for managerial achievement, the options are not exercisable unless Farmer Fabrication’s stock price increases by 5% in three years. Farmer initially estimates that it is not probable the goal will be achieved. How much compensation will be recorded in each of the next three years?
Concord Corporation is a regional company which is an SEC registrant. The corporation’s securities are thinly traded on NASDAQ. Concord Corp. has issued 12,500 units. Each unit consists of a $ 625 par, 12% subordinated debenture and 13 shares of $ 6 par common stock. The units were sold to outside investors for cash at $ 1,100 per unit. Prior to this sale, the 2-week ask price of common stock was $ 50 per share. Twelve percent is a reasonable market yield for the debentures, and therefore the par value of the bonds is equal to the fair value.(a) Prepare the journal entry to record Concord’ s transaction, under the following conditions. (Round answers to 0 decimal places, e.g. $38,487. Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.) (1) Employing the incremental method. (2) Employing the proportional method, assuming the recent…
In January, Arbor Corporation, a paper company with annual sales of more than $2 billion and assets of more than $5 billion, issued 4 million registered common shares at an average price of $50 per share. In preparing for the registration statement, Charles Controller relied on a report by Acme Appraisers, which stated that the company's woodlands were worth $900 million. Acme's report was not included in the registration statement, and Acme was not mentioned int he prospectus. Ollie Olson, the company's newly elected outside director (and Controller's bother-in-law) questioned whether the woodland estimate might be too high. Controller reassured him that "if the numbers are good enough for our CPA's, they're good enough for me". In February, the company discovered that the woodland appraisal was overstated by $150 million. Management and the directors were livid about the error. To add to Arbor's problems, a major competitor shocked the industry by announcing that it would…
Cullumber, Inc., a high-technology firm in Portland, raised a total of $60 million in an IPO. The company received $27 of the $30 per share offering price. The firm’s legal fees, SEC registration fees, and other out-of-pocket costs were $350,000. The firm’s stock price increased 17 percent on the first day of trading. What was the total cost to the firm of issuing the securities?

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