Team Shirts issued 20,000 shares of stock for 20 per share. The ...

[chads108]

Team Shirts issued 20,000 shares of stock for 20 per share. The par value of the stock was 1 per share. Calculate the value of capital stock and additional paid-in capital.
 
  A) capital stock 400,000; additional paid-in capital 0
  B) capital stock 380,000; additional paid-in capital 20,000
  C) capital stock 20,000; additional paid-in capital 380,000
  D) capital stock 0; additional paid-in capital 400,000

Question 2

Toys for Boys, Inc had prepaid insurance of 7,200 on January 1, 2011. This amount relates to a 12-month insurance policy purchased on July 1, 2010 for 14,400.
 
  On July 1, 2011, Toys for Boys purchased more insurance coverage by paying 9,000 for a new one-year policy. The company's year ends on December 31, 2011 and all adjustments for the whole year are made on that date so that financial statements can be prepared. What amount should appear on the December 31, 2011 balance sheet as prepaid insurance? What amount should be reported on the year ended December 31, 2011 income statement as insurance expense?
 
  What will be an ideal response?

[mbcrismon]

Answer to Question 1

C

Answer to Question 2

Prepaid insurance at Dec. 31, 2011: 4,500 (=9,000/2)
Insurance expense for the year: 11,700 (=7,200+4,500)