Question

1. The costs of issuing common shares:

a. They are recorded in a separate account (unamortized stock issue costs) and amortized over a period of no more than 10 years

b. They are posted to a separate account but are not amortized unless the company withdraws the shares

c. They are subtracted from the capital paid in excess (additional paid-in capital)

d. They are accounted for as an expense as incurred

2. When a company issues shares (common or preferred) in exchange for an asset other than money, the issue price is:

a. The market price of the shares on the issue date

b. The par value of the shares

c. The "book value per-share" of the shares.

c. None of the above because shares can only be issued in exchange for money

3. A company has on its books the “Treasury stock” account with a balance of $ 50,000 (its cost) and the “Paid-in capital from treasury stock” account with a balance of $ 5,000. The company sold half of the treasury stock for $ 18,000. The wage entry to record the sale of treasury stock is:

1. Cash                                              18,000

Loss on sale of treasury stock       7,000

     Treasury stock                                     25,000

2. Cash                                  18,000

Retained earnings              7,000

    Treasury stock                          25,000

3. Cash                                                          18,000

Paid-in capital from treasury stock           5,000

Retained earnings                                      2,000

    Treasury stock                                                  25,000

4. Cash                                                          18,000

Paid-in capital from treasury stock           2,500

Retained earnings                                      4,500

    Treasury stock                                                  25,000

Answer 1