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10 October, 17:14

Montgomery & Co., a well-established law firm, provided 500 hours of its time to Fink Corporation and received 1,000 shares of Fink's $5 par common stock in exchange for services rendered. Montgomery's usual billing rate is $700 per hour, and Fink's stock has a book value of $250 per share. By what amount will Fink's paid-in capital-excess of par increase for this transaction? Group of answer choices C) $350,000. D) $300,000. B) $295,000. A) $345,000.

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  1. 10 October, 19:56
    0
    Answer: A) $345,000.

    Explanation:

    The Paid in Capital excess of Par refers to the amount of money the share is valued at because of a transaction that is above it's normal par value.

    The Law Firm's bill had the payment being in cash would be,

    = $700 * 500 hours.

    = $350,000

    Instead Fink's was able to exchange,

    = 1,000 shares * $5

    = $5,000 par value shares with Montgomery

    This means when that when they record it, the amount of Paid in Capital excess of Par will be,

    = 350,000 - 5,000

    = $345,000

    The transaction with Montgomery essentially valued Fink's shares $345,000 more than their par value.
  2. 10 October, 20:17
    0
    A) $345,000

    Explanation:

    Montgomery & Co

    Legal expense (500 x $700) 350,000

    Less Common stock (1,000 x $5) 5,000

    Paid-in capital-excess of par345,000

    Therefore the amount that Fink's will paid-in capital-excess of par increase for this transaction is $345,000
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