10 3 journalize the issuance of shares 1 many companies raise capital by issuing sha 4351936

10.3   Journalize the issuance of shares

1) Many companies raise capital by issuing shares directly to shareholders or by using an underwriter.

2) The price that the corporation receives from issuing shares is called the underwriter price.

3) All Canadian shares are no-par value.

4) A corporation may issue shares for other than cash, requiring the recording of the assets at current market value.

5) Five hundred common shares trading at $25/share were exchanged for a piece of equipment with a current market value of $13,500.  The journal entry to record the transaction would include a:

A) credit to Equipment for $12,500.

B) debit to Common Shares for $12,500.

C) credit to Common Shares for $12,500.

D) credit to Common Shares for $13,500.

E) debit to Equipment for $13,500.

6) The Harvester Company issued 40 shares trading at $20/share to its accountant in full payment for her $900 fee for assisting in setting up the new company.  The entry to record the issuance of the stock would include a:

A) debit to Common Shares for $800.

B) credit to Common Shares for $900.

C) credit to Common Shares for $800.

D) debit to Accounting Fees for $900

E) credit to Cash for $900.

7) Birch is a publicly traded company and issues 200 preferred shares for $12 per share.  Which of the following is a part of the journal entry for this transaction?

A) Debiting preferred shares for $2,400

B) Crediting preferred shares for $2,400

C) Crediting cash for $2,400

D) Crediting preferred shares for $200

E) Debiting preferred shares for $200

8) An underwriter usually agrees to:

A) buy all the shares it cannot sell to its clients.

B) buy half the shares it cannot sell to its clients.

C) buy none of the shares it cannot sell to its clients.

D) buy a certain percentage of the shares it cannot sell to its clients.

E) sell 100% of the shares.

9) A company can sell its shares directly to shareholders or it can use the services of an __________.

10) The price that the corporation receives from issuing shares is called the __________ price.

Posted in Uncategorized