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Exercises 597
Instructions 00:21
Journalize the transactions.
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JE13-6 As an auditor for the CPA firm of Hinkson and Calvert, you encounter the following Journalize noncash common
situations in auditing different clients.
1. LR Corporation is a closely held corporation whose stock is not publicly traded. On (LO2)
stock transactions.
December 5, the corporation acquired land by issuing 5,000 shares of its $20 par value
common stock. The owners’ asking price for the land was $120,000, and the fair value
of the land was $110,000.
2. Vera Corporation is a publicly held corporation whose common stock is traded on the
securities markets. On June 1, it acquired land by issuing 20,000 shares of its $10 par
value stock. At the time of the exchange, the land was advertised for sale at $250,000.
The stock was selling at $11 per share.
Identify characteristics of a
corporation.
(LO 1)
6. Creditors have a legal claim on the personal assets of the owners of a corporation if the
7. The transfer of stock from one owner to another requires the approval of either the
corporation does not pay its debts.
corporation or other stockholders.
8. The board of directors of a corporation legally owns the corporation. caring
10. Corporations are subject to fewer state and federal regulations than partnerships o
9. The chief accounting officer of a corporation is the controller.
proprietorships.
SA
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Instructions
Identify each statement as true or false. If false, indicate how to correct the statement.
E13-2 Andrea (see E13-1) has studied the information you gave her in that exercise and
has come to you with more statements about corporations.
1. Corporation management is both an advantage and a disadvantage of a corporation
2. Limited liability of stockholders, government regulations, and additional taxes are the
compared to a proprietorship or a partnership.
major disadvantages of a corporation.
3. When a corporation is formed, organization costs are recorded as an asset.
stockholder meetings, share in corporate earnings, keep the same percentage ownership
when new shares of stock are issued, and share in assets upon liquidation.
5. The number of issued shares is always greater than or equal to the number of authorized
shares.
6. A journal entry is required for the authorization of capital stock.
7. Publicly held corporations usually issue stock directly to investors.
8. The trading of capital stock on a securities exchange involves the transfer of already
issued shares from an existing stockholder to another investor.
9. The market price of common stock is usually the same as its par value.
10. Retained earnings is the total amount of cash and other assets paid in to the corporation
by stockholders in exchange for capital stock.
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Instructions
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Identify each statement as true or false. If false, indicate how to correct the statement.
Instructions
Prepare
the journal entries for each of the situations above. olano
Journalize treasury stock
# E13-7 On January 1, 2017, the stockholders’ equity section of Newlin Corporation shows
common stock ($5 par value) $1,500,000; paid-in capital in excess of par $1,000,000; and transactions.
retained earnings $1,200,000. During the year, the following treasury stock transactions (LO 3)
dent Corp
Mar. 1 Purchased 50,000 shares for cash at $15 per share.
Sold 10,000 treasury shares for cash at $17 per share.
Sold 8,000 treasury shares for cash at $14 per share.
occurred.
July 1
Sept. 1
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Instructions
(a) Journalize the treasury stock transactions.
(b) Restate the entry for September 1, assuming the treasury shares were sold at $12 per share.
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4E13-8 Rinehart Corporation purchased from its stockholders 5,000 shares of its own pre- Journalize treasury stock
viously issued stock for $255,000. It later resold 2,000 shares for $54 per share, then 2,000
more shares for $49 per share, and finally 1,000 shares for $43 per share.
(LO 3)
Instructions
Prepare journal entries for the purchase of the treasury stock and the three sales of treasury
stock.
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transactions.
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E13-9 Tran Corporation is authorized to issue both preferred and common stock. The par Journalize preferred stock
value of the preferred is $50. During the first year of operations, the company had the transactions and indicate
statement presentation.
following events and transactions pertaining to its preferred stock.
(LO 2, 4)
Feb. 1 Issued 20,000 shares for cash at $53 per share.
July 1 Issued 12,000 shares for cash at $57 per share.
dalys
Instructions
(a) Journalize the transactions.
(b) Post to the stockholders’ equity accounts.
(c) Indicate the financial statement presentation of the related accounts.
Journalize issuance of E13-3 During its first year of operations, Foyle Corporation had the following transac-
common stock.
tions pertaining to its common stock.
LO 2)
Jan. 10 Issued 70,000 shares for cash at $5 per share. Goicos
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July 1 Issued 40,000 shares for cash at $7 per share. | 1 vàLC 300 C LÀ TÓ.
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Instructions
(a) Journalize the transactions, assuming that the common stock has a par value of $5 per
share.
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(b) Journalize the transactions, assuming that the common stock is no-par with a stated
value of $1
per
share.
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trnalize issuance of * E13-4 Osage Corporation issued 2,000 shares of stock.
nmon stock.
Instructions
2)
Prepare the entry for the issuance under the following assumptions.
(a) The stock had a par value of $5 per share and was issued for a total of $52,000.
(b) The stock had a stated value of $5 per share and was issued for a total of $52,000.
(c) The stock had no par or stated value and was issued for a total of $52,000.
(d) The stock had a par value of $5 per share and was issued to attorneys for services
during incorporation valued at $52,000.
(e) The stock had a par value of $5 per share and was issued for land worth $52,000.
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calize issuance of
4E13-5 Quay Co. had the following transactions during the current period.
zon and preferred stock
Mar. 2
urchase of treasury stock.
Issued 5,000 shares of $5 par value common stock to attorneys in payment of a
bill for $30,000 for services performed in helping the company to incorporate.
3)
June 12 Issued 60,000 shares of $5 par value common stock
for cash of $375,000.
July 11 Issued 1,000 shares of $100 par value preferred stock for cash at $110 per share.
Nov. 28
Purchased 2,000 shares of treasury stock for $80,000.
PHERE
May 2
E13-10 Gilliam Corporation recently hired a new accountant with extensive experience in Prepare correct entries for
accounting for partnerships. Because of the pressure of the new job, the accountant was capital stock transactions.
unable to review his textbooks on the topic of corporation accounting. During the first (LO 2, 3)
month, the accountant made the following entries for the corporation’s capital stock.
Cash
130,000
Capital Stock
130,000
(Issued 10,000 shares of $10 value
common stock at $13 share)
Cash
600,000
Capital Stock
600,000
(Issued 10,000 shares of $50 par value
preferred stock at $60 per share)
par
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