Accounting, Chapters 1-13
27th Edition
ISBN: 9781337272100
Author: Carl Warren, James M. Reeve, Jonathan Duchac
Publisher: Cengage Learning
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Chapter 13, Problem 13.6CP
(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.
Case study
To discuss: The arguments for and against classifying the issuance of the $25 million of stock as debt.
(2)
To determine
To elect: A practical Explanation to this classification problem.
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a. Journalize the transactions of January 31, June 14, and November 23. If an amount box does not require an entry, leave it blank.
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b. What is the balance in Paid-In Capital from Sale of Treasury Stock on December 31 of the current year?$fill in the blank
c. What is the balance in Treasury Stock on December 31 of…
The following is a news item reported by Reuters:WASHINGTON, Jan 29 (Reuters)—Crossfire Medical Group, a maker of reconstructive implants for knees and hips, on Tuesday filed to sell 3 million shares of common stock. In a filing with the U.S. Securities and Exchange Commission, it said it plans to use the proceeds from the offering for general corporate purposes, working capital, research and development, and acquisitions. After the sale there will be about 32.5 million shares outstanding in the Arlington, Tennessee-based company, according to the SEC filing. Wright shares closed at $17.25 on Nasdaq. The common stock of Crossfire Medical Group has a par of $0.03 per share. Required:Prepare the journal entry to record the sale of the shares assuming the price existing when the announcement was made and ignoring share issue costs.
Chapter 13 Solutions
Accounting, Chapters 1-13
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 - What is the primary purpose of a stock split?Ch. 13 - Prob. 7DQCh. 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 - A Dividends per share Reinhardt Furniture Company...Ch. 13 - Dividends per share Zero Calories Company has...Ch. 13 - Entries for issuing stock On May 23, Stoltz Realty...Ch. 13 - Entries for issuing stock On January 22, Zentric...Ch. 13 - Prob. 13.3APECh. 13 - Entries for cash dividends The declaration,...Ch. 13 - Prob. 13.4APECh. 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 - Retained earnings statement Rockwell Inc. reported...Ch. 13 - Retained earnings statement None Cruises Inc....Ch. 13 - Earnings per share Financial statement data for...Ch. 13 - Earnings per share Financial statement data for...Ch. 13 - Dividends per share Imaging Inc., a developer of...Ch. 13 - Dividends per share Lightfoot Inc., a software...Ch. 13 - Prob. 13.3EXCh. 13 - Prob. 13.4EXCh. 13 - Issuing stock for assets other than cash On April...Ch. 13 - Prob. 13.6EXCh. 13 - Issuing stock Willow Creek Nursery, with an...Ch. 13 - Issuing stock Work Place Products Inc., a...Ch. 13 - Entries for cash dividends The declaration,...Ch. 13 - Prob. 13.10EXCh. 13 - Prob. 13.11EXCh. 13 - Prob. 13.12EXCh. 13 - Prob. 13.13EXCh. 13 - Prob. 13.14EXCh. 13 - Treasury stock transactions Lawn Spray Inc....Ch. 13 - Prob. 13.16EXCh. 13 - Reporting paid-in capital The following accounts...Ch. 13 - Stockholders' Equity section of balance sheet The...Ch. 13 - Prob. 13.19EXCh. 13 - Retained earnings statement Sumter Pumps...Ch. 13 - Prob. 13.21EXCh. 13 - Statement of stockholders' equity The...Ch. 13 - EPS Junkyard Am, Inc., had earnings of 516,000 for...Ch. 13 - Prob. 13.24EXCh. 13 - EPS Caterpillar Inc. and Deere Company are two...Ch. 13 - Prob. 13.1APRCh. 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 transactions...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 transactions Nav-Go...Ch. 13 - Entries for selected corporate transactions West...Ch. 13 - Prob. 13.1CPCh. 13 - Prob. 13.2CPCh. 13 - Communication Motion Designs Inc. has paid...Ch. 13 - Prob. 13.5CPCh. 13 - Prob. 13.6CP
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- Issuing stock Epstein Engineering Inc. began operations on January 5, 20Y8, with the issuance of 500,000shares of 80 par common stock. The sole stockholders of Epstein Engineering Inc. are Barb Abrams and Dr. Amber Epstein, who organized Epstein Engineering Inc. with the objective of developing a new flu vaccine. Dr. Epstein claims that the flu vaccine, which is nearing the final development stage, will protect individuals against 90% of the flu types that have been medically identified. To complete the project, Epstein Engineering Inc. needs 25,000,000 of additional funds. The local banks have been unwilling to loan the funds because of the lack of sufficient collateral and the riskiness of the business. The following is a conversation between Barb Abrams, the chief executive officer of Epstein Engineering Inc., and Amber Epstein, the leading researcher: Barb: What are we going to do? The banks wont loan us any more money, and weve got to have 25 million to complete the project. We are so close! It would be a disaster to quit now. The only thing I can think of is to issue additional stock. Do you have any suggestions? Amber: I guess youre right. But if the banks wont loan us any more money, how can we find any investors to buy stock? Barb: Ive been thinking about that. What if we promise the investors that we will pay them 5% of sales until they receive an amount equal to what they paid for the stock? Amber: What happens when we pay back the 25 million? Do the investors get to keep the stock? If they do, itll dilute our ownership. Barb: How about if after we pay back the 25 million, we make them turn in their stock for 120 per share? Thats one and one-half times what they paid for it, and they would have already gotten all their money back. Thats a 120 profit per share for the investors. Amber: It could work. We get our money but dont have to pay any interest, dividends, or the 80 per share until we start generating sales. 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