Question

Evergreen Building, Inc. issued 2,000 shares of $14 par common stock in exchange for a truck with a current market value of $45,000. Which of the following is not part of the journal entry for this transaction?

A. Crediting Common Stock for $28,000    B. Crediting Common Stock for $45,000    C. Crediting Paid-In Capital in excess of par-common for $17,000    D. Debiting Equipment for $45,000

In the indirect method of Cash Flows, which of the following would be added to net income?         A. A decrease in Sales Tax Payable    B. An increase in Inventory    C. A decrease in Supplies    D. An increase in Prepaid Rent Which of the following causes the par value of a company's stock to decrease?         A. Stock dividend    B. Cash dividend    C. Sale of additional stock    D. Stock split Evergreen Corp. issues 12,000 shares of $5 par common stock for $8.50 per share. The amount credited to paid-in capital in excess of par is         A. $42,000.    B. $60,000.    C. $12,000.    D. $102,000.

Answer 1

1) Journal entry

Date	account and explanation	debit	credit
	Truck (equipment)	45000
	Common Stock (2000*14)		28000
	Paid in capital in excess of par value-Common Stock		17000

So answer is b) Crediting Common Stock for $45,000

2) According to indirect statement of cash flow rules when current assets decreases and current liabilities increases is should be added in net income

Inventory and prepaid rent increase so it should not be added but supplies decrease so it should be added in net income

So answer is c) A decrease in Supplies

3) Stock dividend, Additional issue stock or cash dividend all are the not the reason of decreases par value of stock but when company do stock split stock par value decrease in the ratio of stock split

So answer is d) Stock split

4) Additional paid in capital = Total paid in capital-Common Stock balance

= (12000*8.50)-(12000*5)

Additional paid in capital = 42000

So answer is a) $42000