Bundle: Accounting, Chapters 1-13, 26th + Working Papers, Chapters 1-17 For Warren/reeve/duchac's Accounting, 26th And Financial Accounting, 14th + ... For Warren/reeve/duchac's Accounting, 26th
26th Edition
ISBN: 9781337498159
Author: Carl Warren, Jim Reeve, Jonathan Duchac
Publisher: Cengage Learning
expand_more
expand_more
format_list_bulleted
Videos
Question
Chapter 13, Problem 13.3CP
(1)
To determine
Common stock: These are the ordinary shares that a corporation issues to the investors in order to raise funds. In return, the investors receive a share of profit from the profits earned by the corporation in the form of dividend.
To discuss: The arguments for and against classifying the issuance of the $25 million of stock as debt.
(2)
To determine
To elect: A practical Explanation to this classification problem.
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
Olivia Company was formed on July 1, 2017. It was authorized to issue 500,000 shares of P10 par value
common stock and 100,000 shares of 8%, P25 par value, cumulative and nonparticipating preferred stock.
Olivia Company has a July 1–June 30 fiscal year. The following information relates to the stockholders’ equity
accounts of Olivia Company.
Common Stock: Prior to the 2019–2020 fiscal year, Olivia Company had 110,000 shares of outstanding common
stock issued as follows.
1. 95,000 shares were issued for cash on July 1, 2017, at P31 per share.
2. On July 24, 2017, 5,000 shares were exchanged for a plot of land which cost the seller P70,000 in 2011
and had an estimated fair value of P220,000 on July 24, 2017.
3. 10,000 shares were issued on March 1, 2019, for P42 per share.
During the 2019–2020 fiscal year, the following transactions regarding common stock took place.
November 30,
2019
Olivia purchased 2,000 shares of its own stock on the open market at P39 per share.…
Olivia Company was formed on July 1, 2017. It was authorized to issue 500,000 shares of P10 par value common stock and 100,000 shares of 8%, P25 par value, cumulative and nonparticipating preferred stock. Olivia Company has a July 1–June 30 fiscal year. The following information relates to the stockholders’ equity accounts of Olivia Company.
Common Stock: Prior to the 2019–2020 fiscal year, Olivia Company had 110,000 shares of outstanding common stock issued as follows.
1. 95,000 shares were issued for cash on July 1, 2017, at P31 per share.
2. On July 24, 2017, 5,000 shares were exchanged for a plot of land which cost the seller P70,000 in 2011 and had an estimated fair value of P220,000 on July 24, 2017.
3. 10,000 shares were issued on March 1, 2019, for P42 per share.
During the 2019–2020 fiscal year, the following transactions regarding common stock took place.
November 30, 2019 Olivia purchased 2,000 shares of its own stock on the open market at P39 per share. Olivia uses the…
D'Ouville Company was formed on July 1, 2017. It was authorized to issue 500,000 shares of $10 par value common stock and 100,000 shares of 4%, $25 par value, cumulative and nonparticipating preferred stock. D'Ouville Company has a July 1–June 30 fiscal year. The following information relates to the stockholders’ equity accounts of D'Ouville Company.
Common Stock: Prior to the 2019–2020 fiscal year, D'Ouville Company had 110,000 shares of outstanding common stock issued as follows.
1.   95,000 shares were issued for cash on July 1, 2017, at $31 per share.
2.   On July 24, 2017, 5,000 shares were exchanged for a plot of land which cost the seller $70,000 in 2011 and had an estimated fair value of $220,000 on July 24, 2017.
3.   10,000 shares were issued on March 1, 2019, for $42 per share.
During the 2019–2020 fiscal year, the following transactions regarding common stock took place.
November 30, 2019
D'Ouville purchased 2,000 shares of its own stock on the open market at $39 per…
Chapter 13 Solutions
Bundle: Accounting, Chapters 1-13, 26th + Working Papers, Chapters 1-17 For Warren/reeve/duchac's Accounting, 26th And Financial Accounting, 14th + ... For Warren/reeve/duchac's Accounting, 26th
Ch. 13 - Of two corporations organized at approximately the...Ch. 13 - Prob. 2DQCh. 13 - A corporation with both preferred stock and common...Ch. 13 - An owner of 2,500 shares of Simmons Company common...Ch. 13 - Prob. 5DQCh. 13 - Prob. 6DQCh. 13 - The treasury stock in Discussion Question 7 is...Ch. 13 - What are the three classifications of restrictions...Ch. 13 - Indicate how prior period adjustments should he...Ch. 13 - What is the primary purpose of a stock split?
Ch. 13 - Dividends per share National Furniture Company has...Ch. 13 - Dividends per share Zero Calories Company has...Ch. 13 - Entries for issuing stock On August 26, Mountain...Ch. 13 - Entries for issuing stock On January 22, Zentric...Ch. 13 - Prob. 13.3APECh. 13 - Entries for cash dividends The declaration,...Ch. 13 - Entries for stock dividends Olde Wine Corporation...Ch. 13 - Entries for stock dividends Antique Buggy...Ch. 13 - Prob. 13.5APECh. 13 - Entries for treasury stock On May 27, Hydro...Ch. 13 - Reporting stockholders equity Using the following...Ch. 13 - Reporting stockholders' equity Using the following...Ch. 13 - Prob. 13.7APECh. 13 - Retained earnings statement Noric Cruises Inc....Ch. 13 - Earnings per share Financial statement data for...Ch. 13 - Prob. 13.8BPECh. 13 - Dividends per share Triple Z Inc., a developer of...Ch. 13 - Dividends per share Lightfoot Inc., a software...Ch. 13 - Entries for issuing par stock On April 20,...Ch. 13 - Entries for issuing no-par stock On May 15, Helena...Ch. 13 - Prob. 13.5EXCh. 13 - Prob. 13.6EXCh. 13 - Issuing stock Willow Creek Nursery, with an...Ch. 13 - Prob. 13.8EXCh. 13 - Entries for cash dividends The declaration,...Ch. 13 - Prob. 13.10EXCh. 13 - Treasury stock transactions Mystic Lake Inc....Ch. 13 - Prob. 13.12EXCh. 13 - Prob. 13.13EXCh. 13 - Reporting paid-in capital The following accounts...Ch. 13 - Stockholders' Equity section of balance sheet The...Ch. 13 - Prob. 13.16EXCh. 13 - Retained earnings statement Sumter Pumps...Ch. 13 - Prob. 13.18EXCh. 13 - Statement of stockholders equity The stockholders...Ch. 13 - Prob. 13.20EXCh. 13 - Prob. 13.21EXCh. 13 - Prob. 13.22EXCh. 13 - Prob. 13.23EXCh. 13 - EPS Pacific Gas and Electric Company is a large...Ch. 13 - Prob. 13.25EXCh. 13 - Dividends on preferred and common stock Sunbird...Ch. 13 - Prob. 13.2APRCh. 13 - Selected stock transactions The following selected...Ch. 13 - Entries for selected corporate transactions Morrow...Ch. 13 - Entries for selected corporate transact ions...Ch. 13 - Prob. 13.1BPRCh. 13 - Stock transaction for corporate expansion Pulsar...Ch. 13 - Selected stock transactions Diamondback Welding ...Ch. 13 - Entries for selected corporate transactions6...Ch. 13 - Entries for selected corporate transactions West...Ch. 13 - Prob. 13.1CPCh. 13 - Prob. 13.2CPCh. 13 - Prob. 13.3CPCh. 13 - Prob. 13.4CPCh. 13 - Prob. 13.5CP
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Similar questions
- Kent Corporation was organized on January 1, 2014. On that date, it issued 200,000 shares of 10 par value common stock at 15 per share (400,000 shares were authorized). During the period January 1, 2014, through December 31, 2019, Kent reported net income of 750,000 and paid cash dividends of 380,000. On January 5, 2019, Kent purchased 12,000 shares of its common stock at 12 per share. On December 28, 2019, 8,000 treasury shares were sold at 8 per share. Kent used the cost method of accounting for treasury shares. What is Kents total shareholders equity as of December 31, 2019? a. 3,290,000 b. 3,306,000 c. 3,338,000 d. 3,370,000arrow_forwardOutstanding Stock Lars Corporation shows the following information in the stockholders equity section of its balance sheet: The par value of common stock is S5, and the total balance in the Common Stock account is $225,000. There are 13,000 shares of treasury stock. Required: What is the number of shares outstanding? Use the following information for Exercises 10-58 and 10-59: Stahl Company was incorporated as a new business on January 1, 2019. The company is authorized to issue 600,000 shares of $2 par value common stock and 80,000 shares of 6%, S20 par value, cumulative preferred stock. On January 1, 2019, the company issued 75,000 shares of common stock for $15 per share and 5,000 shares of preferred stock for $25 per share. Net income for the year ended December 31, 2019, was $500,000.arrow_forwardRollers company is incorporated on January 1, 2018. Company is authorized to issue160,000 shares of $6 par value. Following transactions related Shares issued Shares issued Net income Dividend paid Treasury stock purchased 16,000 @$8 per share 32,000 @ $9 per share $160,000 $80,000 3,500 shares @ $11 per share The balance of stockholder's equity at end of year 2018 is: $489,500 $576,000 $457.500 $416,000 Reset Answerarrow_forward
- Haney Corporation issued 20,000 shares of common stock on January 1, 2018. The stock has par value of $1.00 per share and was sold at $30 per share. Which of the following is the correct journal entry to record this transaction? a. Debit Cash $600,000, credit Common stock $20,000, and credit Paid-in capital $580,000. b. Debit Cash $600,000 and credit Paid-in capital $600,000. c. Credit Cash $600,000, debit Common stock $20,000, and debit Paid-in capital $580,000. d. Debit Cash $600,000 and credit Common stock $600,000.arrow_forwardGlen Tay Inc. had issued 24,000 shares of its no-par common shares on April 1, 2017 for property with an appraisal value of $320,000. The common shares of the company were being traded at $13.15 each on that day.  What is the journal entry required to record the issuance of the shares? Select one: a. DR Common Shares Receivable, $320,000; CR Common Share Capital, $315,600; CR Gain On Issue Of Shares, $4,400. b. DR Common Shares Receivable, $320,000; CR Common Share Capital, $315,600; CR Contributed Surplus - Common Shares, $4,400. c. DR Property, $320,000; CR Common Share Capital, $315,600; CR Retained Earnings -Issue Of Shares, $4,400. d. DR Property, $320,000; CR Common Share Capital, $315,600; CR Gain On Issue Of Shares, $4,400. e. None of the above entries.arrow_forwardOn December 31,2016, the shareholders' equity section of the financial position of Kent Corp. was as follows: Ordinary share par valueP1.00, 1,000 shares authorized 300 shares issued and outstanding P 300 Share Premium 1,800 Retained Earnings 2,000 Total P4,100 On January 1,2017, the Board of Directors declared a share dividends of one share for every three shares owned. Accordingly, 100 additional shares were issued. On January 2, the fair market value of Kent's share was P10 per share. The most appropriate presentation of Kent's shareholders' equity on January 2, 2017, following the issuance of the 100 additional share, is: а. Ordinary share P400 b. Ordinary share P400 Share Premium 1,700 Share Premium 1,800 Retained Earnings Retained Earnings 1,900 P4,100 2,000 Total P4,100 Total Ordinary share Share Premium С. P500 d. Ordinary share P500 1,700 Share Premium 1,600 Retained Earnings Retained Earnings 1,900 P4,100 2,000 P4,100 Total Totalarrow_forward
- On February 1, 2016, Tayao Corportion, a newly formed company, had the following shares issued and outstanding: Feb. 1 Issued 10,000 ordinary shares at P15 par at P18 and 1,000 Preference shares, P30 par at P45 *arrow_forwardBentiey Corporation received oash from issuing 12,000 shares of common stock at par on January 1, 2018. The stock has a par value of $0.02 per share. Which is the comect journal entry to record this transaction? O A. Cash is credited for $12,000 and Common Stock-$0.02 Par Value is debited for $12.000. O B. Paid - In Capital in Excess of Par-Common is debited for $11,760, and Common Stock-S0.02 Par Value is credited for $11,700. O C. Cash is debited for $240, and Common Stock-$0.02 Par Value is credited for $240. OD. Cash is debited for $12,000, Common Stock-$0.02 Par Value is oredited for $240, and Pald - in Capital in txcens of Par- Common credited for $11,760arrow_forwardMai Corporation was organized on January 1, 2016, Duringits first year, the corporation issued 40,000 shares of $50 par value preferred stock and 300,000 shares of $10 par value common stock. At December 31, the company declared the following cash dividends: December​2016 ​​$90,000 December​2017 ​​130,000 December​2018 ​​190,000 Required:  1.  Show the allocation of dividends to each class of stock, assuming that the      preferred stock is 8% and not cumulative.  2.  Show the allocation of dividends to each class of stock, assuming that the         preferred stock is 9% and cumulativearrow_forward
- Mai Corporation was organized on January 1, 2016, During its first year, the corporation issued 40,000 shares of $50 par value preferred stock and 300,000 shares of $10 par value common stock. At December 31, the company declared the following cash dividends: December       2016               $90,000 December       2017               130,000 December       2018               190,000 Required: Show the allocation of dividends to each class of stock, assuming that the  preferred stock is 9% and cumulative.arrow_forwardPenn Company was formed on July 1, 2018. It was authorized to issue 300,000 shares of $10 par value common stock and 100,000 shares of 8% $25 par value, cumulative and nonparticipating preferred stock. Penn Company has a July 1-June 30 fiscal year. The following information relates to the stockholders’ equity accounts of Penn Company. Common Stock Prior to the 2020–2021 fiscal year, Penn Company had 110,000 shares of outstanding common stock issued as follows. 1.   85,000 shares were issued for cash on July 1, 2018, at $31 per share. 2.   On July 24, 2018, 5,000 shares were exchanged for a plot of land which cost the seller $70,000 in 2012 and had a fair value (based on recent land sales) of $220,000 on July 24, 2018. 3.   20,000 shares were issued on March 1, 2019, for $42 per share. During the 2020–2021 fiscal year, the following transactions regarding common stock took place. November 30, 2020 000 Penn purchased 2,000 shares of its own stock on the open market at $39 per share.…arrow_forwardOn January 1, 2018 Juniper Corporation issued 60,000 shares of its total 200,000 authorized shares of $4 par value common stock for $8 per share. On December 31, 2018, Juniper Corporation’s common stock is trading at $12 per share. A) assuming Juniper Corporation did not issue any more common stock in 2018, how does the increase in value of its outstanding stock affect juniper? (Indicate which lettered statement is correct and why) A) juniper should recognize additional net income from 2018 of $4 per share, or $240,000 B) paid-in capital at December 31,2018, is $720,000 (I.e., 60,000 shares times $12 per share) C) this increase in market value of outstanding stock is not recorded in the financial statements of juniper corporation D) each shareholder must pay an additional $4 per share to juniper Explanation for your answer (1-3 sentences max)arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
Intermediate Accounting: Reporting And AnalysisAccountingISBN:9781337788281Author:James M. Wahlen, Jefferson P. Jones, Donald PagachPublisher:Cengage Learning
Cornerstones of Financial AccountingAccountingISBN:9781337690881Author:Jay Rich, Jeff JonesPublisher:Cengage Learning
Intermediate Accounting: Reporting And Analysis
Accounting
ISBN:9781337788281
Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher:Cengage Learning
Cornerstones of Financial Accounting
Accounting
ISBN:9781337690881
Author:Jay Rich, Jeff Jones
Publisher:Cengage Learning
Dividend explained; Author: The Finance Storyteller;https://www.youtube.com/watch?v=Wy7R-Gqfb6c;License: Standard Youtube License