The stockholders’ equity section on the December 31, 2014, balance sheet of Amer

Question

The stockholders’ equity section on the December 31, 2014, balance sheet of American Corporation follows: Stockholders’ Equity Contributed capital Preferred stock (par $26; authorized 15,000 shares, ? issued, of which 900 shares are held as treasury stock) $ 234,000 Common stock (no-par; authorized 22,000 shares, issued and outstanding 9,000 shares) 720,000 Contributed capital (includes $2,100 from treasury stock transactions) 20,100 Retained earnings 39,000 Cost of treasury stock, preferred (20,700)

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

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

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

6 How much did the treasury stock held cost per share? (Round your answer to 2 decimal places.)

7. Calculate the value of total stockholders’ equity

8. Calculate the average issue price of the common stock: (Round your answer to 2 decimal places.)

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

Explanation / Answer

3. Number of shares of preferred stock issued = $ 234,000 / $ 26 = 9,000

Total issue proceeds = $ 234,000 + $ ( 20,100 - 2,100) = $ 252,000

Average sale price of preferred stock when issued = $ 252,000 / 9,000 = $ 28

4. The treasury stock transactions have increased corporate resources by $ 2,100

5. The treasury stock transactions have increased stockholders'equity by $ 2,100

6. Treasury stock held cost per share = $ 20,700 / 900 = $ 23

7. Total stockholders' equity = $ 234,000 + $ 720,000 + $ 20,100 + $ 39,000 - $ 20,700 = $ 992,400

8. Average issue price of common stock = $ 720,000 / 9,000 = $ 80

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