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Wiley CPAexcel Exam Review 2014 Study Guide, Financial Accounting and Reporting by O. Ray Whittington

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Multiple-Choice Questions (1–94)

A. Common Stock

1. East Co. issued 1,000 shares of its $5 par common stock to Howe as compensation for 1,000 hours of legal services performed. Howe usually bills $160 per hour for legal services. On the date of issuance, the stock was trading on a public exchange at $140 per share. By what amount should the additional paid-in capital account increase as a result of this transaction?

a. $135,000

b. $140,000

c. $155,000

d. $160,000

2. On July 1, year 1, Cove Corp., a closely held corporation, issued 6% bonds with a maturity value of $60,000, together with 1,000 shares of its $5 par value common stock, for a combined cash amount of $110,000. The market value of Cove’s stock cannot be ascertained. If the bonds were issued separately, they would have sold for $40,000 on an 8% yield to maturity basis. What amount should Cove report for additional paid-in capital on the issuance of the stock?

a. $75,000

b. $65,000

c. $55,000

d. $45,000

3. Beck Corp. issued 200,000 shares of common stock when it began operations in year 1 and issued an additional 100,000 shares in year 2. Beck also issued preferred stock convertible to 100,000 shares of common stock. In year 3, Beck purchased 75,000 shares of its common stock and held it in Treasury. At December 31, year 3, how many shares of Beck’s common stock were outstanding?

a. 400,000

b. 325,000

c. 300,000

d. 225,000

4. A corporation was organized in January year 1 with authorized capital of $10 par value common ...

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