London Limited Issued 2,000 Common Shares in Payment of Its

question 157

Multiple Choice

London Limited issued 2,000 common shares in payment of its lawyer's bill of $ 8,000. London Limited assured the lawyer that the shares would be worth $ 10,000 within one year. The bill was for services performed in helping the company incorporate. Southern should record this transaction by debiting

• A) Legal Fees Expense for $ 10,000.
• B) Legal Fees Expense for $ 8,000.
• C) Common Shares for $ 10,000.
• D) Common Shares for $ 8,000.

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Definitions:

Contribution Margin

The amount of revenue remaining after variable costs have been deducted, which contributes to covering fixed costs and generating profit.

Opportunity Cost

The expense associated with missing out on the second-best option when a choice is made.

Contribution Margin

The difference between sales revenue and variable costs, indicating how much revenue is available to cover fixed costs and generate profit.

Variable Cost

Costs that change in proportion to the level of activity or volume of production, such as materials and labor.