Question

1. If Briggs and Stratton Company issues 9000 shares of $5 par value common stock for $160,000, the account

a) Common Stock will be credited for $45,000

b) Paid-In Capital in Excess of Par will be credited for $160,000

c) Cash will be debited for $115,000

d) Paid-in Capital in Excess of Par will be credited for $45,000

2. Airstream Company purchases 400 shares of its own $10 par value common stock for $27 per stock per $29 per share. In entry to record the sale of the treasury stock, there will be

a) credit to Paid-In Capital from Treasury Stock for $800

b) credit to Common Stock for 10,800

c) credit to Treasury Stock for $11,600

d) credit to Treasury Stock for $4000

3. A company has 20,000 shares of $8 par value common stock. If they have a 4 for 1 stock split there will be:

a) 20,000 shares of $2 par stock

b) 80,000 shares of $32 par stock

c) 5,000 shares of $8 par stock

d) 80,000 shares of $2 par stock

Answer 1

1:-

Journal Entry will be

Debit : Cash $160000

Credit: Common stock $45000(9000 Shares X $5 par Value)

Credit: Additional paid in capital $115000($160000-$45000)

Option (a) is Correct.

2:-

Journal Entry regarding Purchases and sale of treasury stock

when common share Purchased

Debit : Treasury stock 10800 (400 shares X $27)

Credit: Cash 10800

when Treasury stock resale

Debit: Cash $11600 ( 400 Share X $29)

Credit: Treasury Stock $10800

Credit: Additional Paid In capital $800( ✓)

Option(a) is correct.

3:-

No.of shares after split =20000 shares X 4 =80000 shares

New par value Common Shares = $8/4 = $2

Option (d) is Correct.