18
Corporations:
Organizations and
Capital Stock
ANSWERS TO DISCUSSION QUESTIONS AND
CRITICAL THINKING/ETHICAL CASE
1. The articles of incorporation are submitted to the state in applying for a
charter. A charter is a document issued to a corporation by a state that
3. Limited liability; unlimited life; ease of transferring ownership interest; mutual
4. Stockholders’ Equity is made up of Paid-in Capital and Retained Earnings;
5. The charter of the corporation indicates the maximum amount of shares of
7. Legal capital: Amount that a corporation must retain in the business for
protection of creditors.
10. If the proceeds of a sale of stock are greater than par value it is recorded in
11. The difference between the fair market value of the noncash asset and the
12. The Organization Expense account records the costs incurred to get an
14. The question in this case is whether Avan Corporation should avoid reporting
its pending lawsuit on the annual report. The stockholders have the right to
SOLUTIONS TO CONCEPT CHECKS
1.
3.
Date
Accounts
Dr.
Cr.
May 7
Cash
9,200
Common stock
9,200
Oct. 17
Cash
Common Stock
Paid-In Capital in Excess of Par Value-Common
Nov. 25
Cash
Common Stock
8,000
Paid-In Capital in Excess of Stated Value-Common
Dec. 28
Organization Expense
Common Stock
Paid-In Capital in Excess of Par Value-Common
3,100
4.
Preferred
Common
25,680
5.
Date
Accounts
Dr.
Cr.
Jul. 1
Subscriptions Receivable-Common Stock
44,000
13,000
Sep. 30
Cash
22,000
22,000
Dec. 31
Cash
22,000
22,000
Dec. 31
Common Stock Subscribed
31,000
31,000
SOLUTIONS TO SET A EXERCISES
18A–1.
(a) Jul.
20
Cash
81
9
0
0
00
Common Stock
69
3
0
0
00
Paid-in Capital in Excess of Par Value-Common
12
6
0
0
00
(c) Jul.
20
Cash
9
00
Common Stock
31
5
0
0
00
18A–2.
10
Equipment
0
0
00
Common Stock
4
0
Paid-in Capital in Excess of Par Value-Common
6
0
18A-3.
Year
Dividend to Preferred Stock
Dividend to Common Stock
18A-4.
Jan.
1
Subscriptions Receivable-Common Stock
93
6
0
0
00
Common Stock Subscribed
53
0
4
0
00
Paid-in Capital in Excess of Par Value-Common
40
5
6
0
00
Jul.
1
Cash
8
00
Subscriptions Receivable-Common Stock
46
8
0
0
00
46
8
0
0
00
31
Common Stock Subscribed
0
00
Common Stock
53
0
4
0
00
EXERCISES (CONTINUED)
18A–5.
PEARKER CORPORATION
Stockholders’ Equity
Paid-in Capital
Common Stock, No Par Value, Stated Value
$19 per Share, Authorized 37,000 Shares,
6,400 Shares Issued and Outstanding
$121
6
0
0
00
Paid-in-Capital in Excess of Stated
Value-Common
SOLUTIONS TO SET B EXERCISES
18B–1.
(a) Jul.
20
Cash
69
6
0
0
00
Common Stock
63
8
0
0
00
Paid-in Capital in Excess of Par Value-Common
8
0
0
00
Common Stock
69
6
0
0
00
(c) Jul.
Cash
6
Common Stock
17
4
0
0
00
Paid-in Capital in Excess of Stated Value-Common
52
2
0
0
00
18B-2.
10
Equipment
0
00
Common Stock
9
0
Paid-in Capital in Excess of Par Value-Common
1
0
18B-3.
Year
Dividend to Preferred Stock
Dividend to Common Stock
18B-4.
Jan.
1
Subscriptions Receivable-Common Stock
86
8
6
0
00
Common Stock Subscribed
48
4
8
0
00
Paid-in Capital in Excess of Par Value-Common
38
3
8
0
00
Jul.
1
Cash
4
00
Subscriptions Receivable-Common Stock
43
4
3
0
00
31
Common Stock Subscribed
4
00
Common Stock
48
4
8
0
00
EXERCISES (CONTINUED)
18B-5.
BILLINGS CORPORATION
Stockholders’ Equity
Paid-in Capital
Common Stock, No Par Value, Stated Value
$21 per Share, Authorized 37,000 Shares,
6,500 Shares Issued and Outstanding
$136
5
0
0
00
Paid-in-Capital in Excess of Stated
Value-Common
SOLUTIONS TO SET A PROBLEMS
PROBLEM 18A-1
(1) RENZO CORPORATION
GENERAL JOURNAL
PAGE 3
Date
201X
Account Titles and Description
PR
Dr.
Cr.
Jun.
1
Cash
369
6
0
0
00
311
13
2
0
0
312
0
0
0
Cash
2
0
312
0
0
Paid-in Capital in Excess of Par Value-Common
313
8
0
0
00
Jul.
2
Cash
571
2
0
0
00
Preferred Stock
310
550
8
0
0
00
311
20
4
0
0
Building
0
0
00
Land
0
0
0
00
Common Stock
312
7
0
0
00
313
79
3
0
0
PREFERRED STOCK
ACCOUNT NO. 310
Date
201X
Explanation
Post
Ref.
Debit
Credit
Balance
Debit
Credit
Jun.
1
Balance
√
486
0
0
0
00
1
GJ3
356
4
0
0
842
4
0
0
00
2
GJ3
550
8
0
0
2
0
0
00
PROBLEM 18A-1 (CONTINUED)
PAID-IN CAPITAL IN EXCESS OF PAR-PREFERRED
ACCOUNT NO. 311
Date
201X
Explanation
Post
Ref.
Debit
Credit
Balance
Debit
Credit
Jun.
1
Balance
√
116
0
0
0
00
1
GJ3
2
2
Jul.
2
GJ3
4
0
0
6
0
0
00
COMMON STOCK
ACCOUNT NO. 312
Date
201X
Explanation
Post
Ref.
Debit
Credit
Balance
Debit
Credit
Jun.
Balance
0
GJ3
0
0
0
0
0
0
GJ3
4
0
0
4
0
0
Jul.
18
GJ3
7
0
0
1
0
0
PAID-IN CAPITAL IN EXCESS OF PAR-COMMON
ACCOUNT NO. 313
Date
201X
Explanation
Post
Ref.
Debit
Credit
Balance
Debit
Credit
Jun.
1
Balance
√
165
0
0
0
00
GJ3
0
0
0
0
0
GJ3
8
0
0
0
0
GJ3
79
3
PROBLEM 18A-1 (CONCLUDED)
(2)
Paid-in Capital:
2
0
0
Paid-in Capital in Excess of Par Value-Preferred
6
0
0
Common Stock, $21 par, authorized 54,000 shares, 39,100 shares issued
1
0
0
Paid-in Capital in Excess of Par Value-Common
1
0
0
Preferred Stock, $108 par, authorized 22,000 shares, 12,900 shares issued
PROBLEM 18A-2
2015
2016
2017
2018
2019
Total Dividends
$0
$12,160
$36,480
$0
$68,440
a)
PREFERRED
0
$12,160
$12,160
0
$12,160
PROBLEM 18A-3 NEON CORPORATION
STOCKHOLDER’S EQUITY
JULY 31, 201X
Paid-in Capital
Preferred Stock, 12%, $53 par, authorized 10,000
shares, 5,700 shares issued and outstanding
$302
1
0
0
00
Paid-in Capital in Excess of Par Value-Preferred
100
0
0
0
00
Total Paid-in Capital by Preferred Stockholders
1
0
0
0
0
00
Total Paid-in Capital
1
0
PROBLEM 18A-4
(1) LINCOLN CORPORATION
GENERAL JOURNAL
PAGE 6
Date
201X
Account Titles and Description
PR
Dr.
Cr.
Aug.
10
Land
17
5
0
0
00
Building
19
0
0
0
00
Common Stock
0
0
0
Paid-in Capital in Excess of Par Value-Common
5
0
0
Aug.
15
Subscriptions Receivable-Common Stock
0
0
0
00
Common Stock Subscribed
4
0
0
Paid-in Capital in Excess of Par Value-Common
6
0
0
Aug.
21
Cash
0
0
0
00
Common Stock
4
0
0
Subscriptions Receivable-Common Stock
125
0
0
0
Aug.
Common Stock Subscribed
4
0
0
00
Common Stock
150
4
0
0
PROBLEM 18A-4 (CONCLUDED)
(2) LINCOLN CORPORATION
STOCKHOLDER’S EQUITY
Paid-in Capital:
Common Stock, $8 par, authorized 275,000 shares,
SOLUTIONS TO SET B PROBLEMS
PROBLEM 18B-1
(1) ROYCE CORPORATION
GENERAL JOURNAL
PAGE 3
Date
201X
Account Titles and Description
PR
Dr.
Cr.
Jun.
1
Cash
291
6
0
0
00
Preferred Stock
310
280
8
0
0
00
Paid-in Capital in Excess of Par Value-Preferred
311
8
0
0
00
2
Cash
241
4
0
0
00
Common Stock
312
163
3
0
0
00
Paid-in Capital in Excess of Par Value-Common
313
1
0
0
00
15
Cash
374
4
0
0
00
Common Stock
312
179
4
0
0
00
Paid-in Capital in Excess of Par Value-Common
313
195
0
0
0
00
Jul.
2
Cash
594
0
0
0
00
Preferred Stock
310
561
6
0
0
00
Paid-in Capital in Excess of Par Value-Preferred
311
4
0
0
00
18
Building
0
0
0
00
Land
0
0
0
00
Common Stock
312
9
0
0
00
Paid-in Capital in Excess of Par Value-Common
313
1
0
0
00
PREFERRED STOCK
ACCOUNT NO. 310
Date
201X
Explanation
Post
Ref.
Debit
Credit
Balance
Debit
Credit
Jun.
1
Balance
√
416
0
0
0
00
1
GJ3
8
0
0
696
8
0
0
00
2
GJ3
6
0
0
4
0
0
00
PROBLEM 18B-1 (CONTINUED)
PAID-IN CAPITAL IN EXCESS OF PAR-PREFERRED
ACCOUNT NO. 311
Date
201X
Explanation
Post
Ref.
Debit
Credit
Balance
Debit
Credit
Jun.
1
Balance
√
115
0
0
0
00
1
GJ3
0
0
125
0
Jul.
2
GJ3
4
2
0
0
00
COMMON STOCK
ACCOUNT NO. 312
Date
201X
Explanation
Post
Ref.
Debit
Credit
Balance
Debit
Credit
Jun.
1
Balance
√
483
0
0
0
00
GJ3
0
GJ3
0
Jul.
18
GJ3
0
PAID-IN CAPITAL IN EXCESS OF PAR-COMMON
ACCOUNT NO. 313
Date
201X
Explanation
Post
Ref.
Debit
Credit
Balance
Debit
Credit
GJ3
0
GJ3
0
GJ3
1
0
2
0
0
00
PROBLEM 18B-1 (CONCLUDED)
(2)
Paid-in Capital:
Common Stock, $23 par, authorized 50,000 shares, 38,200 shares issued
Preferred Stock, $104 par, authorized 24,000 shares, 12,100 shares issued
PROBLEM 18B-2
2015
2016
2017
2018
2019
Total Dividends
$0
$15,000
$45,000
$0
$77,400
a)
PREFERRED
0
$15,000
$15,000
0
$15,000
PROBLEM 18B-3 RATION CORPORATION
STOCKHOLDER’S EQUITY
July 31, 201X
Paid-in Capital
Preferred Stock, 10%, $48 par, authorized 10,500
shares, 6,600 shares issued and outstanding
$316
8
0
0
00
Paid-in Capital in Excess of Par Value-Preferred
125
0
0
0
00
Common Stock, $11 par, authorized 75,000
shares, 65,000 shares issued and outstanding
715
0
0
0
00
280
0
0
0
00
Paid-in Capital in Excess of Par Value-Common
0
0
0
00
Retained Earnings
0
0
00
PROBLEM 18B-4
(1) REBAL CORPORATION
GENERAL JOURNAL
PAGE 6
Date
201X
Account Titles and Description
PR
Dr.
Cr.
PROBLEM 18B-4 (CONCLUDED)
(2) REBAL CORPORATION
STOCKHOLDERS’ EQUITY
Paid-in Capital:
Common Stock, $7 par, authorized 325,000 shares,
27,150 shares issued and outstanding
$190
0
5
0
00
Paid-in Capital in Excess of Par Value-Common
4
5
0
00
FINANCIAL REPORT PROBLEM SOLUTION—2016 Amazon’s Annual Report