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Chapter 13: 33E_3 (page 716)

Determining the effect of stock dividends, stock splits, and treasury stock transactions

Many types of transactions may affect stockholders鈥� equity. Identify the effects of the following transactions on total stockholders鈥� equity. Each transaction is independent.

c. Purchase of 1,100 shares of \(0.50 par treasury stock at \)6 per share.

Short Answer

Expert verified

Treasury stock will affect the shareholders鈥� equity as it will be reduced by the amount of shares repurchased by the corporation.

Step by step solution

01

Calculation of treasury stock

Treasurystock=NumberofShares脳PricePerShares=1,100脳$6=$6,600

02

The effect of stock dividends, stock splits, and treasury stock transactions

Treasury shares reduced the amount in the stockholders' equity section of a corporation's balance sheet. Shareholders鈥� equity will be reduced with the amount $6,600.

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Most popular questions from this chapter

A Identifying sources of equity, stock issuance, and dividends

Voyage Comfort Specialists, Inc. reported the following stockholders鈥� equity on its balance sheet at June 30, 2018:

Preferred Stock鈥�7%, ? Par Value; 625,000 shares

authorized, 280,000 shares issued and outstanding

Paid-In Capital:

\( 1,400,000

1,340,000

Stockholders鈥� Equity

Paid-In Capital in Excess of Par鈥擟ommon 2,900,000

Total Paid-In Capital 5,640,000

Retained Earnings 12,000,000

Total Stockholders鈥� Equity \) 17,640,000

Common Stock鈥�$1 Par Value; 3,000,000 shares

authorized, 1,340,000 shares issued and outstanding

Requirements

1. Identify the different classes of stock that Voyage Comfort Specialists has outstanding.

What is par value?

Question - Describing corporation characteristics

Due to recent beef recalls, Southwest Steakhouse is considering incorporating. Bob, the owner, wants to protect his personal assets in the event the restaurant is sued.

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2. What are some disadvantages of organizing as a corporation?

Question: Identifying sources of equity, stock issuance, and dividends

Tillman Comfort Specialists, Inc. reported the following stockholders鈥� equity on its balance sheet at June 30, 2018:

Preferred Stock鈥�5%, ? Par Value; 625,000 shares

authorized, 325,000 shares issued and outstanding

Paid-In Capital:

\( 1,300,000

1,350,000

Stockholders鈥� Equity

Paid-In Capital in Excess of Par鈥擟ommon 2,600,000

Total Paid-In Capital 5,250,000

Retained Earnings 11,800,000

Total Stockholders鈥� Equity \) 17,050,000

Common Stock鈥�$1 Par Value; 7,000,000 shares

authorized, 1,350,000 shares issued and outstanding

Requirements

2. What is the par value per share of Tillman Comfort Specialists鈥� preferred stock?

Question: Organizing a corporation and issuing stock

Jimmy and Randy are opening a comic store. There are no competing comic stores in the area. They must decide how to organize the business. They anticipate profits of $550,000 the first year, with the ability to sell franchises in the future. Although they have enough to start the business now as a partnership, cash flow will be an issue as they grow. They feel the corporate form of operation will be best for the long term. They seek your advice.

Requirements

1. What is the main advantage they gain by selecting a corporate form of business now?
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