1. Which of the following represents the maximum number of shares that a corporation can issue? A. Outstanding shares C. Authorized shares B. Issued shares D. Treasury shares 2. Peace, InC. issued 1 ,000 shares of common stock at 10 per share. If the stock has a par value of 4 a share, the journal entry to record the issuance would include a A. Credit to Common Stock for 4,000 B. Debit to Cash for 4,000 C. Credit to Paid -in-Capital in Excess of Par for 10,000 D. Debit to Retained Earnings for 6,000 3. If 1,000 shares of 5 par common stock are reacquired by a corporation for 12 a share. total stockholders' equity will be reduced by A. 5,000 C. 0 B. 12,000 D. 7,000 4. Selam, InC. issued 1,000 shares of common stock at 10 per share. If the stock was no par stock, the journal entry to record the issuance would include a A. debit to Cash for 6,000 B. credit to Paid -in-Capital in Excess of Par for6,000 C. credit to Common Stock for 10,000 D. debit to Paid -in-Capital in Excess of Par for 10,000

1. **C. Authorized shares**<br /><br />Authorized shares represent the maximum number of shares a corporation is legally allowed to issue, as stipulated in its corporate charter. Issued and outstanding shares are always less than or equal to the authorized amount. Treasury shares are shares that have been issued and subsequently repurchased by the corporation, so they are part of the authorized and issued shares but not outstanding.<br /><br />2. **A. Credit to Common Stock for $4,000**<br /><br />When common stock is issued, the Common Stock account is credited for the par value of the shares. In this case, 1,000 shares * $4 par value = $4,000. Cash would be debited for $10,000 (the total amount received), and Paid-in Capital in Excess of Par would be credited for the difference ($6,000). Retained Earnings is not affected by the issuance of stock.<br /><br />3. **B. $12,000**<br /><br />When a corporation reacquires its own shares (treasury stock), the cost of the reacquisition reduces total stockholders' equity. In this case, the company spent $12 per share to reacquire 1,000 shares, resulting in a $12,000 reduction in stockholders' equity.<br /><br />4. **C. Credit to Common Stock for $10,000**<br /><br />When no-par stock is issued, the entire amount received is credited to the Common Stock account. In this case, 1,000 shares were issued at $10 per share, totaling $10,000. Cash would be debited for the same amount. Since the stock is no-par, there's no "Paid-in Capital in Excess of Par" account involved.<br />