Preferred Stock – 6% cumulative, $20 par value, 10,000 shares authorized…

Question:

Preferred Stock – 6% cumulative, $20 par value, 10,000 shares authorized, 5,000 shares issued and outstanding . .$100,000

Contributed Capital in excess of par value, Preferred Stock . . . 250,000

Common Stock, $5 par value, 20,000 shares authorized, 10,000 shares issued and outstanding. . . 50,000

Contributed Capital in excess of par value, Common Stock . . . 450,000

Total Contributed Capital . . . $ 850,000

Retained Earnings . . . 150,000

Total Stockholders’ Equity . . . $ 1,000,000

  1. Marcy Company issues 2,000 shares of common stock in exchange for a building, with a market value of $100,000. The journal entry to record the exchange will cause Total Contributed Capital to:

A) increase by $10,000 B) increase by $100,000 C) increase by $90,000 D) increase by $80,000 E) remain unchanged

  1. Marcy Company declared and issued a 15% common stock dividend on January 1, 2005, when the market price of their common stock was $12 per share. The journal entry to record the stock dividend will:

A) debit Retained Earnings by $18,000. B) credit Common Stock Dividend Distributable, $15,000 C) credit Contributed Capital in excess of par, Common Stock, $21,000 D) credit Common Stock Dividend Distributable, $10,500 E) credit Contributed Capital in excess of par, Common Stock, $7,500

  1. Marcy Company declared a 100% common stock dividend on January 1, 2005, when the market price of the stock was $7.50. The entry to record this dividend will: A) debit Retained Earnings,$100,000 B) credit Common Stock Dividend Distributable,$50,000 C) credit Contributed Capital in excess of par, Common Stock, $25,000 D) credit Common Stock Dividend Distributable, $100,000 E) Since this is considered a stock split, no journal entry is made
  2. On January 1, 2005, Marcy Company purchased 1,000 shares of its own common stock for $22,000. On February 1, 2005, they sold 600 of these shares for $25 per share, and on March 1, 2005, they sold the remaining 400 shares for $15 per share. The journal entry required on March 1 will include:

A) credit Contributed Capital, Treasury Stock, $1,800 B) debit Retained Earnings for $1,800 C) debit Retained Earnings for $2,800 D) debit Contributed Capital, Treasury Stock, $2,800 E) debit Contributed Capital, Treasury Stock, $1,800

Answer:

Answer 47:

Correct answer is:

B) increase by $100,000

Explanation:

The journal entry for the transaction will be:

Account Title Debit Credit $100,000 Buidling Common Stock, $5 par value $10,000 $90,000 Contributed Capital in excess of par

As such total Contributed Capital by ($10000 + 90000 =) $100,000.

Hence option B is correct and other options A, C and D are incorrect.

Answer 48:

Correct answer is:

A) debit Retained Earnings by $18,000.

Explanation:

Marcy Company declared and issued a 15% common stock dividend on January 1, 2005/

Since it is 15% common stock dividend it is small issue as such the entry will be:

Number of additional shares = 10000 * 15% = 1,500 shares

Account Title Debit Credit Date Jan. 1, 2005 Retained Earnings $18,000 $7,500 $10,500 Common Stock Dividend Distributable Con

Hence option A is correct and other options B, C and D are incorrect.

Answer 49:

Correct answer is:

B) credit Common Stock Dividend Distributable, $50,000

Explanation:

It being 100% common stock dividend declaration, it is a large issue and the entry will be:

Account Title Debit Credit Date Jan. 1,2005 Retained Earnings $50,000 $50,000 Common Stock Dividend Distributable

Hence option B is correct and other options A, C and D are incorrect.

Answer 50:

Correct answer is:

E) debit Contributed Capital, Treasury Stock, $1,800​​​​​​​

Explanation:

Marcy Company purchased 1,000 shares of its own common stock for $22,000. Hence treasury stocks were purchased at $22.

On February 1, 2005, they sold 600 of these shares for $25 per share. This entry will include credit to Contributed Capital, Treasury Stock for (600 * (25 – 22)=) $1,800.

Hence entry for March 1, 2005, transaction for sale of remaining 400 shares for $15 per share will be:

Account Title Debit Credit Date Mar. 1,2005 Cash $6,000 $1,800 Contributed Capital, Treasury Stock Retained Earnings $1,000 $

Hence option E is correct and other options A, B, C and D are incorrect.

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