Question

Lewelling Company issued 110,000 shares of its $1 par common stock to the Michael Morgan law firm as compensation for 5,000 hours of legal services performed. Morgan’s usual rate is $190 per hour. By what amount should Lewelling's paid in capital-excess of par increase as a result of this transaction?

Answer 1

$840,000

Step-by-step explanation:

The computation of the paid in capital - in excess of par is shown below:

= Legal expenses - common stock

where,

Legal expense would be

= Number of hours × usual rate per hour

= 5,000 hours × $190

= $950,000

And, the common stock would 110,000 shares × $1 = $110,000

Now put these values to the above formula

So, the value would be equal to

= $950,000 - $110,000

= $840,000