002 Stock Issuance

Question 1

List the alternatives to par value when a stock does not have such value.

Answer 1

1. Stated Value;

2. No Par Value

Question 2

Define “par value”.

Answer 2

The minimum legal issue price for capital stock in most states and appears on the stock certificate.

Question 3

What value is added to the contributed capital account when a no par stock has a stated value?

Answer 3

Contributed capital in excess of stated value (common).

Question 4

List the requirements for stock sold on a subscription basis.

Answer 4

Contract stating:
1 Specifying share price;
2. Number of Shared;
3. Payment Date

Question 5

Describe the journal entry to record initial payment of stocks sold on subscriptions.

Answer 5

DR: Cash
DR: Subscription Receivable
CR: Common Stock Subscriptions
CR: Additional Paid in Capital (contract price-par).

Question 6

Describe the journal entry for subsequent payments on stock sold on subscriptions.

Answer 6

DR: Cash

CR: Subscriptions Receivable

Question 7

What is the classification of the stock subscriptions receivable account?

Answer 7

Contra owners’ equity (contra common stock subscribed).

Question 8

How is stock issued for nonmonetary consideration valued?

Answer 8

Fair value of stock or consideration, whichever is more reliable.

Question 9

What is the basis of allocation for stock basket sale proceeds?

Answer 9

Fair value of individual stocks in the basket.