Simon Company Issued 2,000 Ordinary Shares with a $5 Par

question 257

Multiple Choice

Simon Company issued 2,000 ordinary shares with a $5 par value in payment of its attorney's bill of $40,000. The bill was for services performed in helping the company incorporate. Simon should record this transaction by debiting

• A) Legal Expense for $10,000.
• B) Legal Expense for $40,000.
• C) Organization Expense for $10,000.
• D) Organization Expense for $40,000.

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Definitions:

Executive Stock Option

A privilege, sold by one party to another, that gives the buyer the right, but not the obligation, to buy (call) or sell (put) a stock at an agreed-upon price within a certain period or on a specific date.

Financial Reporting

The process of producing statements that disclose an organization's financial status to management, investors, and the government.

Preferred Stock

A type of stock that provides dividends to its holders before common stocks and has priority over common stock in the event of a liquidation.

Tax Deductible

Expenses that can be subtracted from gross income to reduce the overall amount of income tax owed to the government.