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Chapter 15: Question 1BE (page 811)

Buttercup Corporation issued 300 shares of \(10 par value common stock for \)4,500. Prepare Buttercup鈥檚 journal entry.

Short Answer

Expert verified

In Buttercup Corporation's book, cash is debited.

Common stock and paid-in capital in excess of par common stock are credited.

Step by step solution

01

Meaning of Common Stock

The term "common stock" refers to a type of security that represents a corporation's ownership. Common investors elect the board of directors, and they also have a say in business decisions.

02

Passing journal entry of Buttercup’s

Date

Particular

Folio

Debit USD

Credit USD

Cash A/c

4,500

To common Stock (300 x $10)

3,000

To paid-in capital in excess of

par common stock

1,500

(being share issued at par)

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Most popular questions from this chapter

Dividends are sometimes said to have been paid 鈥渙ut of retained earnings.鈥� What is the error, if any, in that statement?

What are the principal considerations of a board of directors in making decisions involving dividend declarations? Discuss briefly.

Kellogg Company is the world鈥檚 leading producer of ready-to-eat cereal products. In recent years, the company has taken numerous steps aimed at improving its profitability and earnings per share. Presented below are some basic facts for Kellogg.

(in millions)

2014

2013

Net sales

\(14,580

\)14,792

Net income

632

1,807

Total assets

15,153

15,474

Total liabilities

12,302

11,867

Common stock, $0.25 par value

105

105

Capital in excess of par value

678

626

Retained earnings

6,689

6,749

Treasury stock, at cost

3,470

2,999

Number of shares outstanding (in millions)

358

363

Instructions

  1. What are some of the reasons that management purchases its own stock?
  2. Explain how earnings per share might be affected by treasury stock transactions.
  3. Calculate the debt to assets ratio for 2013 and 2014, and discuss the implications of the change.

List possible sources of additional paid-in capital.

Mary Tokar is comparing a GAAP-based company to a company that uses IFRS. Both companies report equity investments. The IFRS company reports unrealized losses on these investments under the heading 鈥淩eserves鈥� in its equity section. However, Mary can find no similar heading in the GAAP-based company financial statements. Can Mary conclude that the GAAP-based company has no unrealized gains or losses on its non-trading equity investments? Explain.
See all solutions

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