- This topic has 4 replies, 2 voices, and was last updated 11 years, 10 months ago by .
-
Topic
-
Can someone point out what I am missing? Why does one use the value at time of contract and the other at end of contract price? Which one is usually used??
Renwood, Inc. contracted for services to be provided over a period of time in return for 2,000 shares of Renwood’s $5 par common stock when the service is completed. At the time, Renwood stock was selling for $10 per share. When the service was completed, Renwood’s stock price was $12 per share. Therefore, Renwood
A. Recognizes $24,000 of expense.
B. Increases the common stock account $12,000.
C. Increases contributed capital in excess of par $10,000.
D. Credits a liability for $20,000.
Correct!
The total owners’ equity increase of $20,000 (2,000 shares x $10) is recorded at signing. Of that amount, the common stock account will receive $10,000 (2,000 shares x $5 par). Therefore, the remainder ($10,000) is allocated to contributed capital in excess of par. Subsequent changes in stock price do not change the total amount of OE recorded.
llam, Inc. contracted for services to be provided over a period of time with full payment in Allam’s $2 par common stock when the service is completed. At the time of the agreement, Allam stock was trading at $20 per share. The agreed-upon total value of the contract is $20,000. When the service was completed, Allam’s stock price was $25 per share. Therefore, Allam
A. Recognizes $25,000 of expense.
B. Increases the common stock account $1,600.
C. Increases contributed capital in excess of par $23,000.
D. Debits a liability for $25,000.
Correct!
The value of the stock to be issued is $20,000. At time of issuance, the stock price is $25. Therefore, 800 shares are issued ($20,000/$25). The par value of the stock is $2, requiring a credit of $1,600.
Update: Found Accounting Compensation Report – GoingConcern.com
BEC - 84, 4/6/13
AUD - 77, 5/28/13
REG - 83, 4/12/14
FAR - 83, 10/3/13Ethics - 90% 4/24/13
150 unit education requirement met!
Work experience met!
- The topic ‘Compensation questions’ is closed to new replies.