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Macro Economics Essay

3531 words - 15 pages

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B EXERCISES
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E15-1B (Recording the Issuances of Common Stock) During its first year of operations, Endevor Corporation had the following transactions pertaining to its common stock.
Apr. 26
May 11
Aug. 1
Nov. 1

Issued 15,000 shares for cash at $4.50 per share.
Issued 10,000 shares to attorneys in payment of a bill for $48,000 for services rendered in helping
the company to incorporate.
Issued 20,000 shares for cash at $5 per share.
Issued 10,000 shares for cash at $7 per share.

Instructions
(a) Prepare the journal entries for these transactions, assuming that the common stock has a par value
of $1 per share.
(b) ...view middle of the document...

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E15-3B (Stock Issued for Land) Twenty thousand shares reacquired by Sierra Land Inc. for $153 per
share were exchanged for land that has an appraised value of $3,600,000. At the time of the exchange the
common stock was trading at $176 per share on an organized exchange.
Instructions
(a) Prepare the journal entry to record the acquisition of land assuming that the purchase of the stock
was originally recorded using the cost method.
(b) Briefly identify the possible alternatives (including those that are totally unacceptable) for quantifying the cost of the land, and briefly support your choice.

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E15-4B (Lump-Sum Sale of Stock with Bonds) Zurg, Inc. is an SEC registrant, and its securities are thinly
traded on NASDAQ (National Association of Securities Dealers Quotes). Zurg, Inc. issued 10,000 units.
Each unit consists of a $1,000 par, 16% subordinated debenture and 5 shares of $5 par common stock. The
investment banker has retained 500 units as the underwriting fee. The other 9,500 units were sold to outside investors for cash at $1,150 per unit. Prior to this sale the 2-week ask price of common stock was $25
per share. Sixteen percent is a reasonable market yield for the debentures, and therefore the par value of
the bonds is equal to the fair value.
Instructions
(a) Prepare the journal entry to record the previous transaction, under the following conditions.
(1) Employing the incremental method.
(2) Employing the proportional method, assuming the recent price quotes on the common stock
reflect fair value.
(b) Briefly explain which method is, in your opinion, the better method.

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E15-5B (Lump-Sum Sales of Stock with Preferred Stock) Black Diamond Inc. issues 2,500 shares of
$1 par value common stock and 1,000 shares of $50 par value preferred stock for a lump sum of
$275,000.

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Chapter 15 Stockholders’ Equity
Instructions
(a) Prepare the journal entry for the issuance when the market value of the common shares is $95 each
and market value of the preferred is $60 each.
(b) Prepare the journal entry for the issuance when only the market value of the common stock is
known and it is $90 per share.

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E15-6B (Stock Issuances and Repurchase) Overland Corporation is authorized to issue 250,000 shares
of $1 par value common stock. During 2014, Overland Corporation took part in the following selected
transactions.
1. Issued 55,000 shares of stock at $76 per share, less costs related to the issuance of the stock totaling $27,000.
2. Issued 10,000 shares of stock for land appraised at $815,000. The stock was actively traded on a
national stock exchange at approximately $78 per share on the date of issuance.
3. Purchased 6,000 shares of treasury stock at $74 per share. The treasury shares purchased were
issued in 2003 at $46 per share.
Instructions
(a) Prepare the journal entry to record item 1.
(b) Prepare the...

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