Question 24 (1 point) Hendricks Company begins operations on January 1, 2023. The company needs to determine the number of common stock shares that it may issue for it's initial public offering (IPO). Which one of the following items should Hendricks Co. use to determine the total number of shares that the company may issue under it's corporate charter? a) Authorized shares b) Unissued shares c) Issued shares d) Outstanding shares Question 25 (1 point) Hendricks Inc. granted their executives incentive stock options on January 1, 2023. On this date, 275,000 shares of the company's $5 par value common stock were granted at an option price of $40 per share. On the grant date, the market price of the stock was $50 per share. Market prices of the stock were as follows: December 31, 2024 $70 per share December 31, 2025 $82 per share The Black-Scholes option pricing model determines total compensation expense to be $1,500,000. The service period for the options is 2 years. The options were exercisable beginning on January 1, 2025 for employees still working at Hendricks. The options expire on December 31, 2029. What journal entry should the company make on January 1, 2023 under the fair value method? 750,000 a) Compensation Expense Paid-in Capital - Stock Options 750,000 b) Unearned Compensation 12,375,000 Common Stock Paid-in Capital in Excess of Par - Common Stock 1,375,000 11,000,000 c) No Entry needed. 1,500,000 Compensation Expense Paid-in Capital - Stock Options 1,500,000 Question 26 (1 point) Rizzo Corp. began operations on Jan. 1, 2023. Rizzo Corp. is authorized to issue 250,000 shares of it's 6%, $120 par value preferred stock. The company is authorized to issue 780,000 shares of the common stock with a par value of $5 per share. On January 5, 2023, the company issued 315,000 shares of common stock for cash at $12 per share. On January 2, 2024, the company acquired 30,500 shares of its own common stock at $19 per share. On March 1, 2024, Rizzo Corp. sold 12,500 of these shares at $16 per share. No other treasury stock has been sold by the company in the past. To record the sale of the 12,500 treasury shares on March 1, 2024, Rizzo's journal entry should include a debit to a) Treasury Stock for $200,000. b) Paid-in Capital from Treasury Stock for $37,500. c) Cash for $237,500. d) Retained Earnings for $37,500. Question 27 (1 point) Baez Inc. has obtained significant influence over Maples Corp by buying 30% of Maple's 40,000 outstanding shares. Baez purchased the shares at $12 per share on January 1, 2024. On July 1, Maple Corp. declared and paid cash dividends of $52,000 to all stockholders. At the end of the year on December 31, 2024, Maple Corp. reported Net Income of $160,000 for the year. The market price of Mayfair Corp was $14 per share on December 31, 2024. What is the journal entry for Baez Inc. on December 31, 2024? Fair Value Adjustment 24,000 Unrealized Holding Gain or Loss- Income 24,000 15,600 Cash b) Equity Investments 15,600 c) 48,000 Equity Investments Investment Income 48,000 d) No entry is needed
