Acct551 Chapter 15

EXERCISE 15-2 (15–20 minutes)

Jan. 10 Cash (80,000 X $5) 400,000

Common Stock (80,000 X $2) 160,000

Paid-in Capital in Excess of Stated

  Value—Common Stock

  (80,000 X $3) 240,000

Mar. 1 Cash (5,000 X $108) 540,000

Preferred Stock (5,000 X $50) 250,000

Paid-in Capital in Excess of Par—

  Preferred Stock (5,000 X $58) 290,000

April 1 Land 80,000

Common Stock (24,000 X $2) 48,000

Paid-in Capital in Excess of Stated

  Value—Common Stock

  ($80,000 – $48,000) 32,000

May 1 Cash (80,000 X $7) 560,000

Common Stock (80,000 X $2) 160,000

Paid-in Capital in Excess of Stated

  Value—Common Stock

  (80,000 X $5) 400,000

Aug. 1 Organization Expense  50,000

Common Stock (10,000 X $2) 20,000

Paid-in Capital in Excess of Stated

  Value—Common Stock

  ($50,000 – $20,000) 30,000

Sept. 1 Cash (10,000 X $9) 90,000

Common Stock (10,000 X $2) 20,000

Paid-in Capital in Excess of Stated

  Value—Common Stock

  (10,000 X $7) 70,000

Nov. 1 Cash (1,000 X $112) 112,000

Preferred Stock (1,000 X $50) 50,000

Paid-in Capital in Excess of Par

  Value—Preferred Stock

  (1,000 X $62) 62,000

EXERCISE 15-3 (10–15 minutes)

(a) Land ($60 X 25,000) 1,500,000

Treasury Stock ($48 X 25,000) 1,200,000

Paid-in Capital from Treasury Stock 300,000

(b) One might use the cost of treasury stock. However, this is not a relevant measure of this economic event. Rather, it is a measure of a prior, unrelated event. The appraised value of the land is a reasonable alternative (if based on appropriate fair value estimation techniques). However, it is an appraisal as opposed to a market-determined price. The trading price of the stock is probably the best measure of fair value in this transaction.

EXERCISE 15-5 (10–15 minutes)

(a) Fair value of Common (500 X $168) $ 84,000

Fair value of Preferred (100 X $210) 21,000...