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Voltaire Corporation issued 6,000 ordinary shares of CHF5 par value for CHF20 per share.

The entry to
record this transaction includes a credit to Share Premium–Ordinary for

CHF30,000.

CHF60,000.

CHF120,000.

CHF90,000.

S. Lawyer performed legal services for E. Corp. Due to a cash shortage, an agreement was reached
whereby E. Corp. would pay S. Lawyer a legal fee of approximately $20,000 by issuing 5,000 ordinary
shares (par $1). The shares trade on a daily basis and the market price of the shares on the day the
debt was settled is $3 per share. Given this information, the journal entry for E. Corp. to record this
transaction is:

Legal Expense 20,000


Share Capital–Ordinary 20,000

Legal Expense 20,000


Share Capital–Ordinary 5,000
Share Premium–Ordinary 15,000

Legal Expense 15,000


Share Capital–Ordinary 5,000
Share Premium–Ordinary 10,000

Legal Expense 15,000


Share Capital–Ordinary 15,000

Dillon Corporation splits its ordinary shares 2 for 1, when the market value is $30 per share. Prior to
the split, Dillon had 50,000 ordinary shares with a $10 par value issued and outstanding. After the
split, the par value of the shares

is reduced to $5 per share.

is reduced to $15 per share.

remains the same.

is reduced to $2 per share.


Slaton Company originally issued 6,000 ordinary shares with a $10 par value for $90,000 ($15 per
share). Slaton subsequently purchases 600 treasury shares for $27 per share and resells the 600
treasury shares for $29 per share. In the entry to record the sale of the treasury shares, there will be
a

debit to Share Premium–Ordinary of $18,000.

credit to Treasury Shares for $6,000.

credit to Share Capital–Ordinary for $16,200.

credit to Share Premium–Treasury Shares for $1,200.

If Kiner Company issues 5,400 ordinary shares with a $5 par value for $96,000, the account

Share Premium–Ordinary will be credited for $96,000.

Cash will be debited for $69,000.

Share Premium–Ordinary will be credited for $27,000.

Share Capital–Ordinary will be credited for $27,000.

The sale of ordinary shares below par

is not permitted in most jurisdictions.

is a practice that most shareholders encourage.

requires that a liability be recorded for the difference between the sales price and the par value
of the shares.
is a common occurrence in most jurisdictions.

Limited liability of shareholders means that

the entity is separate and distinct from its owners.


they are taxed as a separate legal entity.

the corporation is subject to strict government regulations.

creditors have no legal claim to the assets of the owners unless fraud has occurred.

When ordinary shares are issued for services or non-cash assets, cost should be

only the fair value of the consideration given up.

either the fair value of the consideration given up or the consideration received,
whichever is more clearly evident.
only the fair value of the consideration received.

the book value of the ordinary shares issued.

The Nice Corporation issues 20,000 preference shares with a $100 par value for cash at $110 per
share. The entry to record the transaction will consist of a debit to Cash for $2,200,000 and a credit or
credits to

Share Capital—Preference for $2,000,000 and Share Premium—Preference for


$200,000.
Share Capital—Preference for $2,000,000 and Retained Earnings for $200,000.

Share Capital—Preference for $2,200,000.

Share Premium–Preference for $2,000,000.

Allstate, Inc., has 10,000 shares of 5%, $100 par value, noncumulative preference shares and
100,000 ordinary shares with a $1 par value outstanding at December 31, 2017. If the board of
directors declares a $125,000 dividend, the

preference shareholders will receive the entire $125,000.

preference shareholders will receive $50,000 and the ordinary shareholders will
receive $75,000.
preference shareholders will receive 1/10th of what the ordinary shareholders will receive.
$50,000 will be held as restricted retained earnings and paid out at some future date.