Chapter 8, Problem 9E

a)

To determine

Ascertain the total number of outstanding shares at the end of the period.

Explanation of Solution

Common stock: These are the ordinary shares that a corporation issues to the investors in order to raise funds. In return, the investors receive a share of profit from the profits earned by the corporation in the form of dividend.

Ascertain the total number of outstanding shares at the end of the period:

Common Stock	Outstanding
Beginning Number of Shares	3,000
Issued in this period	2,000
Less: Repurchased as Treasury Stock	(500)
Resold Treasury Stock	120
Ending number of shares outstanding	4,620

Table (1)

Therefore, the total number of outstanding shares at the end of the period is 4,620 shares.

b)

To determine

Ascertain the total number of issued shares at the end of the period.

Explanation of Solution

Ascertain the total number of issued shares at the end of the period:

Common Stock	Issued
Beginning Number of Shares	3,000
Issued in this period	2,000
Ending Number of Shares	5,000

Table (2)

Therefore, the total number of issued shares at the end of the period is 5,000 shares.

c)

To determine

Organize the transactions data in accounts under the accounting equation.

Explanation of Solution

Accounting equation:  Accounting equation is an accounting tool expressed in the form of equation, by creating a relationship between the resources or assets of a company, and claims on the resources by the creditors and the owners. Accounting equation is expressed as shown below.

$\text{Assets = Liabilities + Stockholders' Equity}$

Organize the transactions data in accounts under the accounting equation:

Table (3)

Working note:

(1)Calculate the value of cash received from the issuance of common stock:

$\begin{array}{c}\text{Cash received = Number of shares }\times \text{ Issued value of common stock}\\ \text{= 2,000 shares × \$16}\\ \text{= \$32,000}\end{array}$

(2)Calculate the value of common stock issued at par value:

$\begin{array}{c}\begin{array}{l}\text{Common }\\ \text{stock value}\end{array}\}\text{ = Number of shares }\times \text{ Par value of common stock}\\ \text{= 2,000 shares × \$10}\\ \text{= \$20,000}\end{array}$

(3)Calculate the value of paid-in capital in excess of par value:

$\begin{array}{c}\begin{array}{l}\text{Paid-in capital in }\\ \text{excess of par value}\end{array}\}\text{ = }\left(\begin{array}{l}\text{Cash received }\left(1\right)\text{–}\\ \text{Common stock value }\left(2\right)\end{array}\right)\\ \text{= \$32},000\text{ – \$20,000}\\ \text{= \$12,000}\end{array}$

(4)Calculate the value of treasury stock:

$\begin{array}{c}\text{Treasury stock = }\left[\begin{array}{l}\text{Number of repurchase shares}\times \\ \text{ Value of per share}\end{array}\right]\\ \text{=500}\times \text{\$18 per share}\\ \text{=\$9,000}\end{array}$

(5)Calculate the value of cash received from the resold of treasury stock:

$\begin{array}{c}\text{Cash received = Number of resold shares }\times \text{ Selling price per share}\\ \text{= 120 shares × \$20}\\ \text{= \$2,400}\end{array}$

(6) Calculate the value of treasury stock resold at original cost:

$\begin{array}{c}\text{Treasury stock = Number of resold shares }\times \text{ Original cost per share}\\ \text{= 120 shares × \$18}\\ \text{= \$2,160}\end{array}$

(7) Calculate the value of paid-in capital in excess of cost, TS:

$\begin{array}{c}\begin{array}{l}\text{Paid-in capital in }\\ \text{excess of cost}\end{array}\}\text{ = }\left(\begin{array}{l}\text{Cash received }\left(5\right)\text{–}\\ \text{Common stock value }\left(6\right)\end{array}\right)\\ \text{= \$2},400\text{ – \$2,160}\\ \text{= \$240}\end{array}$

d)

To determine

Prepare the stockholder’s equity section of the balance sheet.

Explanation of Solution

Stockholders’ Equity Section: Stockholder’s equity section is the section of the balance sheet that shows the available balance stockholders’ equity as on reported date at the end of the financial year.

Prepare the stockholder’s equity section of the balance sheet:

Stockholders’ Equity	$	$
Common Stock, $10 par value, 50,000 shares authorized, 5,000 shares issued, and 4,620 shares outstanding	$50,000
Paid-In Capital in Excess of Par, Common	$24,000
Paid-In Capital in Excess of Cost, Treasury Stock	$240
Total Paid-In Capital		$74,240
Add: Retained Earnings		$46,000
Less: Treasury Stock		($6,840)
Total Stockholders’ Equity		$113,400

Table (4)

Therefore, the total value of stockholder’s equity at the end of the year is $113,400.