Montgomery & Co., a well-established law firm, provided 500 hours of its time to Fink Corporation and received 1,000 shares of Fink's $5 par common stock in exchange for services rendered. Montgomery's usual billing rate is $700 per hour, and Fink's stock has a book value of $250 per share. By what amount will Fink's paid-in capital—excess of par increase for this transaction? Group of answer choices C) $350,000. D) $300,000. B) $295,000. A) $345,000.

A) $345,000.

Explanation:

The Paid in Capital excess of Par refers to the amount of money the share is valued at because of a transaction that is above it's normal par value.

The Law Firm's bill had the payment being in cash would be,

= $700 * 500 hours.

= $350,000

Instead Fink's was able to exchange,

= 1,000 shares * $5

= $5,000 par value shares with Montgomery

This means when that when they record it, the amount of Paid in Capital excess of Par will be,

= 350,000 - 5,000

= $345,000

The transaction with Montgomery essentially valued Fink's shares $345,000 more than their par value.

A) $345,000

Explanation:

Montgomery & Co

Legal expense (500 x $700)350,000

Less Common stock (1,000 x $5)5,000

Paid-in capital—excess of par345,000

Therefore the amount that Fink's will paid-in capital—excess of par increase for this transaction is $345,000

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