Log out Go to App
Go to App

Learning Materials

Features

Discover

Chapter 13: 33E_4 (page 716)

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

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

d. Sale of 600 shares of \(0.50 par treasury stock for \)9 per share. Cost of the treasury stock was $7 per share.

Short Answer

Expert verified

The shareholders’ equity will be increased by the resale of treasury stock.

Step by step solution

01

Basic Introduction

TreasuryStock=NumberofShares×PricePerShares=600×$9=$5,400

02

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

When treasury stock is resold, the treasury stock account is decreased, and total shareholders' equity is increased through a credit. The shareholders’ equity will be increased by the amount the treasury stock has been issue i.e., $5,400.

Unlock Step-by-Step Solutions & Ace Your Exams!

  • Full Textbook Solutions

    Get detailed explanations and key concepts

  • Unlimited Al creation

    Al flashcards, explanations, exams and more...

  • Ads-free access

    To over 500 millions flashcards

  • Money-back guarantee

    We refund you if you fail your exam.

Start your free trial

Over 30 million students worldwide already upgrade their learning with Vaia!

One App. One Place for Learning.

All the tools & learning materials you need for study success - in one app.

Get started for free

Most popular questions from this chapter

What is par value?

Reporting earnings per share

Return to the ABC data in Short Exercise S13-12. ABC had 8,000 shares of common stock outstanding during 2018. ABC declared and paid preferred dividends of $4,000 during 2018.

Show how ABC reports EPS data on its 2018 income statement.

Question: Journalizing a small stock dividend

Element Water Sports has 13,000 shares of \(1 par value common stock outstanding.

Element distributes a 5% stock dividend when the market value of its stock is \)15 per share.

Requirements

1. Journalize Element’s declaration of the stock dividend on August 15 and distribution on August 31.

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

2. Would you recommend they initially issue preferred or common stock? Why?

Computing earnings per share and price/earnings ratio

Rocket Corp. earned net income of \(153,040 and paid the minimum dividend to preferred stockholders for 2018. Assume that there are no changes in common shares outstanding during 2018. Rocket’s books include the following figures:

Preferred Stock—6%, \)60 par value; 2,000 shares authorized, 1,000

shares issued and outstanding \( 60,000

Common Stock—\)5 par value; 80,000 shares authorized, 48,000 shares

issued, 46,700 shares outstanding 240,000

Paid-In Capital in Excess of Par—Common 470,000

Treasury Stock—Common; 1,300 shares at cost (26,000)

Requirements

1. Compute Rocket’s EPS for the year.
See all solutions

Recommended explanations on Business Studies Textbooks

Operational Management

Read Explanation

Organizational Communication

Read Explanation

Organizational Behavior

Read Explanation

Change Management

Read Explanation

Human Resources

Read Explanation

Business Development

Read Explanation
View all explanations

What do you think about this solution?

We value your feedback to improve our textbook solutions.

Study anywhere. Anytime. Across all devices.

Sign-up for free