Chapter 15: Contributed Capital
137. Below is the partial trial balance dated December 31, 2016, for James River Corporation.
Notes Payable
$ 35,000
Bonds Payable
150,000
Retained Earnings
145,600
Common Stock
100,000
Preferred Stock
50,000
Additional Paid-in capital-Common
175,000
Additional Paid-in capital-Preferred
100,000
Premium on Bonds Payable
15,000
Accumulated other Comprehensive Income
55,600
Cash
58,900
Equipment
189,000
Accumulated Depreciation
135,000
Required:
Prepare the shareholder’s equity portion of the balance sheet dated December 31, 2016.
$626,200
138. Given the following information for Jumping Johns Bounce Company:
Bonds payable
$150,000
Common stock
25,000
Premium on preferred stock
19,000
Long-term investments in equity securities held for sale
10,000
Preferred stock subscribed
32,000
Retained earnings
53,500
Premium on common stock
38,460
Common stock subscribed
2,800
Subscriptions receivable: preferred stock
17,000
Premium on bonds payable
4,000
Preferred stock
55,000
Temporary investments in equity securities held for sale
25,000
Subscriptions receivable: common stock
15,600
Required:
Compute the total amount of contributed capital for Jumping John’s Bounce Company.
$172,260 ($25,000 + $19,000 + $32,000 + $38,460 + $2,800 + $55,000)
1
Challenging
ACCT.WHAL.16.15.8 – LO: 15.8
United States – BUSPORG: Analytic
United States – OH – Default City – AICPA: FN-Measurement
Bloom’s: Analyzing
139. Several items appear below.
____
a.
Additional paid-in capital on preferred stock
____
b.
Subscriptions receivable: preferred stock
____
c.
Premium on bonds payable
____
d.
Organization expense
____
e.
Long-term investments in equity securities held for sale
____
f.
Common stock subscribed
____
g.
Authorized common stock
____
h.
Treasury stock
____
i.
Additional paid-in capital from treasury stock
____
j.
Retained earnings
Required:
Place an X in front of each item that will appear in the shareholders’ equity section of the balance sheet.
a.
X
e.
b.
f.
X
j.
c.
g.
X
d.
h.
X
140. Provide the definitions for the following terms:
Open corporation
Closed corporation
Domestic corporation
Foreign corporation
141. What rights is a shareholder of capital stock entitled to?
142. Define the following terms:
Treasury Stock
Authorized capital stock
Subscribed capital stock
Outstanding capital stock
Issued capital stock
143. What is a stock subscription?
144. What conditions must be met in order for a share purchase plan to be noncompensatory?
145. What are share based compensation plans?
146. What are the variables that must be considered when a corporation uses the option pricing model?
147. What characteristics may be specified in the contract for preferred stock?
148. Why would a corporation want to repurchase their own stock?
149. List four components that comprise a corporation’s contributed capital.
150. Corporate shareholders can only lose the amount of their investment, in accordance with the concept of limited
liability. State laws have established protection for a corporation’s creditors with the concept of legal capital.
Required:
Explain how legal capital protects a corporation’s creditors and discuss two different ways that legal capital can be
established by a corporation.
151. There is disagreement among accountants as to how subscriptions receivable should be reported on the balance sheet.
Required:
Describe three different ways in which subscriptions receivable can be reflected on the balance sheet, and provide a
justification for each alternative.
152. U.S. GAAP and IFRS utilize similar accounting for shareholders’ equity but there are some differences.
Required:
Explain the differences between U.S. GAAP and IFRS in their accounting for shareholders’ equity.
153. Current GAAP recommends that the fair value method be used to account for compensatory stock option plans. From
a conceptual point of view, this method is an improvement over the intrinsic value method.
Required:
Explain how the fair value method is an improvement over the intrinsic value method.