Exhibit 15-2 Lawrence, Inc., Entered into a Subscription Contract with Several Subscribers

question 15

Multiple Choice

Exhibit 15-2
Lawrence, Inc., entered into a subscription contract with several subscribers that calls for the purchase of 2,000 shares of $5 par common stock for $15 a share. The contract calls for a 20% down payment and specifies that any amounts not paid within the contract period will be forfeited in full.
-Refer to Exhibit 15-2. The initial entry to record this subscription and the down payment would include:

• A) a credit to Common Stock Subscribed for $10,000.
• B) a credit to Additional Paid-in Capital from Subscribed Stock for $10,000.
• C) a debit to Subscriptions Receivable: Common Stock for $30,000.
• D) a debit to Cash for $2,000.

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Definitions:

Net Receivables

the total amount of money owed to a company by its customers minus any amounts that are expected to be uncollectible.

Current Liabilities

Short-term financial obligations that are due within one year or within the normal operating cycle of the business, whichever is longer.

Acid-Test Ratio

A liquidity ratio that measures a company's ability to pay off its current liabilities with its most liquid assets, excluding inventory.

Current Ratio

A liquidity ratio that measures a company's ability to pay short-term obligations with its current assets.