Exam (elaborations)
ACG 3141 Johnson - Exam 2 (1).
ACG 3141 Johnson - Exam 2 (1).
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ACG 3141 Johnson - Exam 2Primary sources of shareholder's equity - ANS-* proprietorship
* partnership
* corporation
- most important
- all of the fortune 500 corporations
Direct Costs associated with equity issuance - ANS-* accounting/legal fees
* underwriting costs
* printing costs
* taxes
Accounting for direct costs associated with equity issuance - ANS-Dr. Cash
Cr. Common Stock and APIC
- you deduct expenses out of cash and APIC accounts when accounting for direct costs
Lump Sum proportional method allocation - ANS-fair value of common (1000 x 20)
fair value of preferred (1000 x 12)
Aggregate fair value = $32,000
allocation to common: (20,000/32,000) x 30,000 = 18,750
allocation to preferred: (12,000/32,000) x 30,000 = 11, 250
Total allocation = $30,000
Lump Sum Incremental method allocation - ANS-Only fair value of common stock is known:
lump sum reciept = 30,000
allocation to common: (1000 x 20) = 20,000
Balance allocated to preferred: 10,000
Record lump sum sales using either proportional/incremental method - ANS-Dr. Cash
Cr. Common Stock, APIC - C/S, Preferred Stock, APIC - P/S
Record Stock Issuance for noncash - ANS-Should record @ fair value or stock issued or the fair
value of noncash consideration
Dr. Non-cash consideration
Cr. Common Stock, paid in capital
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