Calculate the average sale price of the preferred stock when issued. (Round your

Question

     

     

Calculate the average sale price of the preferred stock when issued. (Round your answer to 2 decimal places.)

     

Have the treasury stock transactions increased corporate resources or decreased corporate resources? By how much? (Enter the amount as positive value.)

     

By how much the treasury stock transactions increased (decreased) stockholders’ equity? (Enter the amount as positive value.)

     

     

     

     

The stockholders’ equity section on the December 31, 2014, balance sheet of American Corporation follows:

Explanation / Answer

Requirement 1) Number shares Preferred share Issues: 6000 Numbers

Amount Preferred Stock Issued /Par Value of Preferred Stock

126000 $/ 21$ =6000 Numbers             

Requirement 2) Number Preferred Share outstanding: 11000 Numbers

Authorized Preferred Stock – Issued Preferred Stock

17000 -6000 = 11000 Number

Requirement 3) Average Sale Price Price Per Share:42 $

average issue price per share of preferred stock: [(number of shares issued X par value) + paid in capital] / number of shares issued

[6000*21 $+126000 $]/6000 = 42$

Requirement 4) Treasury Stock Transaction Decreased Corporate Resources 2100 $

Preferred Stock Held by Treasury Stock in Par Value (700*21 $) =14700 $

Less : Cost of Treasury Stock                                                           =(16800 $)

Decrease in Amount of Corporate Resources      = (2100 $)

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