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Chapter 13: Q19RQ (page 707)
What is reported in the discontinued operations section of the income statement?
Discontinued operations ought to be accounted on the income statement: net tax underneath income from continuing operations.
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What account is used to record the premium when issuing common stock? What type of account is this?
Analyzing the effect of prior-period adjustments
Taylor Corporation discovered in 2019 that it had incorrectly recorded in 2018 a cash payment of \(70,000 for utilities expense. The correct amount of the utilities expense was \)35,000.
Requirements
2. How should this error be reported in the 2019 financial statements?
Question: Organizing a corporation and issuing stock
Jimmy and Randy are opening a comic store. There are no competing comic stores in the area. They must decide how to organize the business. They anticipate profits of $550,000 the first year, with the ability to sell franchises in the future. Although they have enough to start the business now as a partnership, cash flow will be an issue as they grow. They feel the corporate form of operation will be best for the long term. They seek your advice.
Requirements
2. Would you recommend they initially issue preferred or common stock? Why?
Question: Organizing a corporation and issuing stock
Jimmy and Randy are opening a comic store. There are no competing comic stores in the area. They must decide how to organize the business. They anticipate profits of \(550,000 the first year, with the ability to sell franchises in the future. Although they have enough to start the business now as a partnership, cash flow will be an issue as they grow. They feel the corporate form of operation will be best for the long term. They seek your advice.
Requirements
3. If they decide to issue \)3 par common stock and anticipate an initial market price of \(75 per share, how many shares will they need to issue to raise \)3,000,000?
Journalizing issuance of stock
Steller Systems completed the following stock issuance transactions:
May 19 Issued 1,700 shares of \(3 par value common stock for cash of \)10.50 per share.
Jun. 3 Issued 300 shares of \(9, no-par preferred stock for \)15,000 cash.
11 Received equipment with a market value of \(68,000 in exchange for 5,000 shares of the \)3 par value common stock.
Requirements
1. Journalize the transactions. Explanations are not required.
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