Question

Gulfport Corporation was organized in January 2017 with authorized capital of $.0001 par value common stock. On February 1, 2017, shares were issued at par for cash. On March 1, 2017, the corporation's attorney accepted 5,000 shares of common stock in settlement for legal services with a fair value of $25,250. Additional paid-in capital would increase on

2/1/2017 3/1/2017
1) Yes No
2) Yes Yes
3) No No
4) No Yes

Answer 1

Gulfport Corporation's issuance of shares at par on February 1, 2017, did not affect additional paid-in capital, whereas issuing shares above par for legal services on March 1, 2017, did increase it, coinciding with option No Yes.

Step-by-step explanation:

The question involves Gulfport Corporation's common stock issuance and the treatment of additional paid-in capital (APIC) on two separate dates. On February 1, 2017, Gulfport Corporation issued shares at par value for cash. Issuing shares at par means that the transaction did not affect additional paid-in capital because APIC represents the amount received by the company over the stock's par value.

However, on March 1, 2017, the company settled legal services by issuing 5,000 shares of common stock with a fair market value of $25,250. This transaction increased additional paid-in capital because the fair value of the legal services exceeded the par value of the stock given in exchange. Therefore, additional paid-in capital would increase on March 1, 2017, making the answer No for February 1, 2017, and Yes for March 1, 2017, thereby aligning with option 4) No Yes.