Analyzing and Computing Average Issue Price and Treasury Stock Cost Assume this is the stockholders' equity section from the Campbell Soup Company balance sheet.
Analyzing and Computing Average Issue Price and Treasury Stock Cost
Assume this is the stockholders' equity section from the Campbell Soup Company balance sheet.
Assume Campbell Soup Company also reports the following statement of stockholders' equity.
(a) Campbell Soup Company reports $20 million in its Common Stock account. Which of the following statements best describes the manner in which this number is computed?
The computation uses the number of outstanding shares multiplied by the market price of the stock.
The computation uses the number of issued shares multiplied by the par value of the stock.
The computation uses the number of issued shares multiplied by the market value of the stock.
The computation uses the number of outstanding shases multiplied by the par value of the stock.
(b) At what average price were the Campbell Soup shares issued? (Round your answer to two decimal places.)
(c) Reconcile the beginning and ending balances of retained earnings.
(Enter any deductions as negative numbers.)
(d) Campbell Soup reports an increase in stockholders' equity relating to the exercise of stock options (titled "Treasury stock issued under management incentive and stock option plans"). This transaction involves the purchase of common stock by employees at a preset price. Which of the following statements best describes the nature of this transaction?
The exercise of employee stock options resulted in the issuance of 3 million shares of stock for a total of $112 million that was recognized as a gain on sale, thus increasing Retained Earnings.
The exercise of employee stock options resulted in the issuance of 3 million shares of stock for a total of $112 million that was recognized as an increase in the Common Stock account only.
The exercise of employee stock options resulted in the issuance of 3 million shares of stock for a total of $112 million that was recognized as a reduction of Treasury Stock and an increase in Additional Paid-In Capital.
The exercise of employee stock options resulted in the issuance of 3 million shares of stock for a total of $112 million that was recognized as an increase in the Common Stock and in the Additional Paid-In Capital.
(e) Which of the following statements best describes the transaction relating to the "Treasury stock purchased" line in the statement of stockholders' equity?
Campbell Soup repurchased 26 million shares of common stock for a total of 5903 million. This transaction had no effect on the components of Stockholders' Equity.
Campbell Soup repurchased 26 million shares of common stock for a total of $903 million. The effect of the repurchase of stock is to reduce Cash and Stockholders' Equity.
Campbell Soup repurchased 26 million shares of common stock for a total of $903 million. The effect of this transaction is to increase Stockholders' Equity.
Campbell Soup repurchased 26 million shares of common stock for a total of $903 million. The effect of the repurchase of stock is to recognize a loss on the repurchase, thus reducing Cash
and Retained Earnings.
Homework Answers
| A- | answer is b | the computation uses the number of shares issued multiplied by the par value of stock | |
| B- | average stock at which shares were issued | (20+337)/532 | 0.67 |
| C- | Retained earning July 29 2007 | 7032 | |
| net earning | 1185 | ||
| dividend | -307 | ||
| Misc. | -8 | ||
| retained earning August 3 2008 | 7902 | ||
| D- | answer is 3 | the exercise of employee stock option plan resulted in the issuance of 3 million shares of a stock for a total of 112 million that was recognized as a reduction of treasury stock and an increase in additional paid in capital | |
| E- | answer is 2 | campbell soup repurchased 26 million shares of common stock for a total of 903 million, the effect of repurchase of stock is to reduce cash and stockholders equity |
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Analyzing and Computing Average Issue Price and Treasury Stock Cost Assume this is the stockholders' equity section from the Campbell Soup Company balance sheet.
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