Question

) Beewell's net income for the year ended December 31, Year 2 was $197,000. Information from Beewell's comparative balance sheets is given below. Compute the cash received from the sale of its common stock during Year 2.

At December 31 Year 2 Year 1
Common Stock, $5 par value $ 512,000 $ 460,800
Paid-in capital in excess of par 960,000 863,800
Retained earnings 700,000 592,800

A) $ 96,200

B) $51,200

C) $147,400

D) $197,000

E) $107,200

Answer 1

Answer:

C) $147,400

Explanation:

Year 2       Year 1  

$512,000 $460,800 Common Stock

$960,000 $863,800 Paid-in capital in excess of par

$700,000 $592,800 Retained earnings

When the company issue new shares the values are recorded in the Common Stock accounts and in the Paid-in Capital in excess of par, the increase on this accounts indicates the value of sales:

$512,000 $460,800 = $51,200 Common Stock

$960,000 $863,800 = $96,200 Paid-in capital in excess of par

$51,200 + $96,200 = $147,400