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Chapter 15: Question 7Q (page 810)

Describe the accounting for the issuance for cash of no-par value common stock at a price in excess of the stated value of the common stock.

Short Answer

Expert verified

The issuance of no-par value stocks is recorded as debiting the cash account and crediting the equity account.

Step by step solution

01

Meaning of No-Par Value

Shares with no par value include a provision to have no redeemable value. The price of such a stock depends on the investor's willingness to pay for the stock.

02

Accounting for the issuance for cash of no-par value

The following is how the issuing of no-par value common stock for cash at a price higher than the stated value of the common stock is accounted for:

  1. The proceeds from the issuing of common stock are debited to increase the cash account.
  2. The stated value of the common stock is credited to Common Stock.
  3. Capital Paid-in in Excess of the Stated Value: The excess of the proceeds from issuing common stock above its declared value is credited to Common Stock.

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Most popular questions from this chapter

Weisberg Corporation has 10,000 shares of \(100 par value, 6%, preference shares and 50,000 ordinary shares of \)10 par value outstanding at December 31, 2017.

Instructions

Answer the questions in each of the following independent situations.

  1. If the preference shares are cumulative and dividends were last paid on the preference shares on December 31, 2014, what are the dividends in arrears that should be reported on the December 31, 2017, statement of financial position? How should these dividends be reported?
  2. If the preference shares are convertible into seven shares of \(10 par value ordinary shares and 3,000 shares are converted, what entry is required for the conversion, assuming the preference shares were issued at par value?
  3. If the preference shares were issued at \)107 per share, how should the preference shares be reported in the equity section?

Where can authoritative IFRS guidance related to stockholders’ equity be found?

Describe the accounting entry for a stock dividend, if any. Describe the accounting entry for a stock split, if any.

(Entries for Stock Dividends and Stock Splits) The stockholders’ equity accounts of G.K. Chesterton Company have the following balances on December 31, 2017.

Common stock, \(10 par, 300,000 shares issued and outstanding \)3,000,000

Paid-in capital in excess of par—common stock 1,200,000

Retained earnings 5,600,000

Shares of G.K. Chesterton Company stock are currently selling on the Midwest Stock Exchange at $37.

Instructions

Prepare the appropriate journal entries for each of the following cases.

  1. A stock dividend of 5% is declared and issued.
  2. A stock dividend of 100% is declared and issued.
  3. A 2-for-1 stock split is declared and issued.

Briefly discuss the implications of the financial statement presentation project for the reporting of stockholders’ equity.
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