The following table shows the equity account (book value) of the DeWitt Com- pan
ID: 2476566 • Letter: T
Question
The following table shows the equity account (book value) of the DeWitt Com- pany, as of December 31, 2014. Currently, DeWitt Company is under pressure from shareholders to repurchase shares. DeWitt’s cash balance is $5,000,000. The stock is trading for $20 a share and the equity section of its balance sheet appears as shown in Table 14. To pacify investors, the company decided to repurchase 50,000 shares of common stock.
a. In Table 12, reconstruct the shareholders’ equity section of the DeWitt balance sheet to reflect the company repurchasing 50,000 shares of stock. An asterisk () marks the spaces to be filled.
b. Indicate what the new price level is expected to be.
c.What is the level in the cash account after the stock repurchase?
Table 11 Before Repurchase The DeWitt Company equity account, December 31, 2013
SHAREHOLDER EQUITY
Common Stock ($5 par value; 1,000,000 shares) $5,000,000
Additional paid-in capital $5,000,000
Retained earnings $15,000,000
Total shareholders’ equity $25,000,000
Table 12 After Repurchase The DeWitt Company equity account, December 31, 2013
SHAREHOLDER EQUITY
Common Stock (* _______ par value; *__________ shares) *_________________
Additional paid-in capital *________________
Retained earnings *________________
Total shareholders’ equity *_________________
Explanation / Answer
2)New price = 24,000,000 / 950,000 = $ 25.26 per share
3)cash balance= 5,000,000-1,000,000 = 4,000,000
common stock [$ 5par value ; 1,000,000 shares outstanding ) 5,000,000 Additional paid in capital 5,000,000 Retained earning 15,000,000 Total stock holders equity 25,000,000 Less:Treasury stock (50000*20) - 1,000,000 shareholders equity 24,000,000Related Questions
drjack9650@gmail.com
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.