(Multiple Choice)
1. On July 14, JX Corporation exchanged 1,000 shares of its $8 par value common stock for a plot of land. JX’s common stock is listed on the NYSE and traded at an average price of $21 per share on July 14. The land was appraised by independent real estate appraisers on July 14 at $23,000. As a result of this exchange, JX’s additional paid-in capital will increase by
a. $0
b. $8,000
c. $13,000
d. $15,000

2. When treasury stock is purchased for cash at more than its par value, what is the effect on total stockholders’ equity under each of the following methods?
Cost Method Par Value Method
a. Increase ....... Increase
b. Decrease ....... Decrease
c. No effect ....... Decrease
d. No effect ....... No effect

3. On July 9, 2007 Metaro Corporation purchased for $108,000, 2,000 shares of Jean Corporation’s newly issued 6% cumulative $20 par value preferred stock. Each share also had one stock warrant attached, which entitled the holder to acquire, at $19, one share of Jean $10 par value common stock for each two warrants held. On July 10, 2007 the market price of the preferred stock (without warrants) was $50 per share and the market price of the stock warrants was $10 per warrant. On September 3, 2007 Metaro sold all the stock warrants for $19,800. What should be the gain on the sale of the stock warrants?
a. $0
b. $800
c. $1,800
d. $9,800

4. What is the most likely effect of a stock split on the par value per share and the number of shares outstanding?
Par Value Number of Shares
Per Share Outstanding
a. Decrease ....... Increase
b. Decrease ....... No effect
c. Increase ....... Increase
d. No effect ....... No effect

5. Landy Corporation was organized on January 2, 2007 with authorized capital of 100,000 shares of $10 par value common stock. During 2007 Landy had the following transactions:
Jan. 12 Issued 20,000 shares at $12 per share
Apr. 23 Issued 1,000 shares for legal services when the market price was $14 per share
What should be the amount of additional paid-in capital at December 31, 2007?
a. $4,000
b. $14,000
c. $40,000
d. $44,000

6. During 2007 Bradley Corporation issued for $110 per share, 5,000 shares of $100 par value convertible preferred stock. One share of preferred stock can be converted into three shares of Bradley’s $25 par value common stock at the option of the preferred shareholder. On December 31, 2008 all of the preferred stock was converted into common stock. The market value of the common stock at the conversion date was $40 per share. What amount should be credited to the common stock account on December 31, 2008?
a. $375,000
b. $500,000
d. $600,000
c. $550,000

7. The Amlin Corporation was incorporated on January 1, 2007, with the following authorized capitalization:
• 20,000 shares of common stock, no par value, stated value $40 per share
• 5,000 shares of 5% cumulative preferred stock, par value $10 per share
During 2007 Amlin issued 12,000 shares of common stock for a total of $600,000 and 3,000 shares of preferred stock at $16 per share. In addition, on December 21, 2007 subscriptions for 1,000 shares of preferred stock were taken at a purchase price of $17. These subscribed shares were paid for on January 4, 2008. What should Amlin report as total contributed capital on its December 31, 2007 balance sheet issued on February 1, 2008?
a. $520,000
b. $648,000
c. $665,000
d. $850,000

8. On January 1, 2007 Stoner Corporation granted compensatory share options to key employees for the purchase of shares of the company’s common stock at $25 per share. The options are intended to compensate employees for the next two years. The options are exercisable within a four-year period beginning January 1, 2009 by grantees still in the employ of the company. The fair value of each option was $7 on the date of grant. Stoner expects to distribute 10,000 shares of treasury stock when options are exercised. The treasury stock was acquired by Stoner during 2006 at a cost of $28 per share and was recorded under the cost method. How much should Stoner charge to compensation expense for the year ended December 31, 2007?
a. $70,000
b. $35,000
c. $30,000
d. $15,000

9. When treasury stock accounted for by the cost method is subsequently sold for more than its purchase price, the excess of the cash proceeds over the carrying value of the treasury stock should be recognized as an
a. Extraordinary gain
b. Increase in additional paid-in capital
c. Income from continuing operations
d. Increase in retained earnings

10. Preferred stock that may be retired by the corporation at its option is known as
a. Convertible
b. Redeemable
c. Cumulative
d. Callable