1. On January 2, 2014, Kine Co. granted Morgan, its president, compensatory stock options to buy 1,000...

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1. On January 2, 2014, Kine Co. granted Morgan, its president, compensatory stock options to buy 1,000 shares of Kine's $10 par common stock. The options call for a price of $20 per share and are exercisable beginning on December 31, 2014. The options can be exercised any time during the three years beginning with this date. Morgan exercised the options on December 31, 2014. The market price of the stock was $40 on January 2, 2014, and $70 on December 31, 2014. The fair value of the options was $25. By what net amount should stockholders' equity increase as a result of the grant and exercise of the options?
(a) $20,000
(b) $25,000
(c) $30,000
(d) $50,000
2. A company issued rights to its existing shareholders without consideration. The rights allowed the recipients to purchase unissued common stock for an amount in excess of par value. When the rights are issued, which of the following accounts will be increased?
.......................Common Stock............Additional Paid-In Capital
(a)...........................Yes...................................Yes
(b)...........................Yes...................................No
(c)............................No...................................No
(d)............................No..................................Yes
3. If a corporation sells some of its treasury stock at a price that exceeds its cost, this excess should be
(a) Reported as a gain in the income statement.
(b) Treated as a reduction in the carrying amount of remaining treasury stock.
(c) Credited to Additional Paid-In Capital.
(d) Credited to Retained Earnings
4. Which of the following should be reported as a stockholders' equity contra account?
(a) Discount on convertible bonds
(b) Premium on convertible bonds
(c) Cumulative foreign exchange translation loss
(d) Organization costs
Common Stock
Common stock is an equity component that represents the worth of stock owned by the shareholders of the company. The common stock represents the par value of the shares outstanding at a balance sheet date. Public companies can trade their stocks on...
Corporation
A Corporation is a legal form of business that is separate from its owner. In other words, a corporation is a business or organization formed by a group of people, and its right and liabilities separate from those of the individuals involved. It may...
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Intermediate Accounting

ISBN: 978-0538479738

18th edition

Authors: Earl K. Stice, James D. Stice

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