1. Define par value of stock. What is the significance of a stock’s par value from...
1. Define par value of stock. What is the significance of a stock’s par value from an accounting and analysis perspective?
2. What are the basic differences between preferred stock and common stock? What are the typical features of preferred stock?
3. What features make preferred stock similar to debt?
4. Distinguish between authorized stock and issued stock. Why might the number of shares issued be more than the number of shares outstanding?
5. Define stock split. What are the major reasons for a stock split?
6. Define treasury stock. Why might a corporation acquire treasury stock? How is treasury stock reported in the balance sheet?
Homework Answers
Ans 1:
The par value of a stock is defined as the face value or stated value per share. It is the value of the stock mentioned in a corporation’s charter. The par value of the stock is a binding two-way contract between the company and the shareholder.
The significance of par value for accounting and analysis perspective is that the company has to record the par value of the outstanding stock in a separate account. Preferred stock par value is used to determine the number of dividends given to the stockholders. Company’s sell shares to generate equity capital. It defines the minimum amount of capital a company will generate if it sells all shares i.e. par value of the stock multiply with the total number of shares.
The par value is the minimum amount at which the share can be sold. Par value was set to ensure that the corporate wouldn’t sell the stock below a particular value. The par value is now set at minimal prices so that in case the company has to sell shares as a penny stock company can pay the minimal prices for the stock. for example, the par value of amazon stock is $ 0.01 and Apple Inc shares par value is $0.00001.
In case the shareholder pays the company less than the par value and if the company is unable to meet its financial obligations the creditors can directly sue shareholders for the difference between purchase value and par value to recover the unpaid debts. If the market price of the stock falls below par value the shareholders can ask the company to pay the difference in par value and the market price. Most companies put a minimum par value to avoid the situation.
Besides, the funds from the sale of par value stock are divided between common stock account and the paid-in capital account.
To conclude a par value is the minimum value per share assigned by the company selling it.
* "answering the first question, pls resubmit balance for answering."
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1.
Define par value of stock. What is the significance of a stock’s
par value from...
1-What are the basic differences between preferred stock and common stock? That is, what are the typical features of pre...
1-What are the basic differences between preferred stock and common stock? That is, what are the typical features of preferred stock? 2- Distinguish between authorized shares and issued shares. Why might the number of shares issued be more than the number of shares outstanding? 3- What is the difference between the accounting for small stock dividend and accounting for a large stock dividend?
(c) What is the par value of the preferred stock? The par value of the preferred...
(c) What is the par value of the preferred stock? The par value of the preferred stock $ 103 per share (d) If the annual dividend on preferred stock is $41,097, what is the dividend rate on preferred stock? The dividend rate 7.21 % (e) If dividends of $73,200 were in arrears on preferred stock, what would be the balance reported for retained earnings? The Retained Earnings balance $ 1163700 e Textbook and Media Attempts: 1 of 3 used Save...
1. Preferred stock $50 par value, 10,000 shares authorized, ? shares issued $4000.00 What is the...
1. Preferred stock $50 par value, 10,000 shares authorized, ? shares issued $4000.00 What is the number of shares of preferred stock issued?
1. BonitaCorp. issues 2800 shares of $10 par value common stock at $15 per share. When...
1. BonitaCorp. issues 2800 shares of $10 par value common stock
at $15 per share. When the transaction is recorded, credits are
made to
Common Stock $28000 and Retained Earnings $14000.
Common Stock $28000 and Paid-in Capital in Excess of Par
$14000.
2. VaughnCompany is authorized to issue 9000 shares of 7%, $100
par value preferred stock and 532000 shares of no-par common stock
with a stated value of $1 per share. If Vaughn issues 4500 shares
of preferred stock...
3. Sweet Sixteen has two classes of stock authorized: $100 par value preferred and $1 par...
3. Sweet Sixteen has two classes of stock authorized: $100 par value preferred and $1 par value common. As of the beginning of 2018, 1,000 shares of preferred stock have been issued and 20,000 shares of common stock have been issued. The following transactions affect stockholders' equity during 2018: March 1 Issue 3,000 additional shares of common stock for $22 per share. April 1 Issue 5,000 additional shares of preferred stock for $110 per share. June 1 Declare a...
$ - Safari Fusion reported shareholders' equity as follows: Preferred stock, $10.00 par value Authorized 10,000...
$ - Safari Fusion reported shareholders' equity as follows: Preferred stock, $10.00 par value Authorized 10,000 shares, issued-None Common stock, $1 par value Authorized 30,000 shares, issued 15,000 shares Capital in excess of par value Retained earnings 15,000 45,000 90,000 150,000 (16,000) $114,000 Total paid-in capital Less: Treasury stock, at cost (2,000 common shares) Total stockholders' equity Requirements 1. What was the average issue price per share of the common stock? 2. Journalize the issuance of 1,000 shares of common...
Preferred stock- $25 par value, 10,eee shares authorized, 6,800 shares issued and outstanding Common stock-$10 par...
Preferred stock- $25 par value, 10,eee shares authorized, 6,800 shares issued and outstanding Common stock-$10 par value, 100,00e shares authorized, 80,0e0 shares issued and outstanding Total paid-in' capital Retained earnings Total stockholders' equity $ 170, eee 800,e00 $ 970,000 550,e00 $1,520,000 The number of issued and outstanding shares of both preferred and common stock have been the same for the last two years Dividends on preferred stock are 8 percent of par value and have been paid each year the...
D. Duck Company was authorized to issue 100,000 shares of $6-par value common stock and 80,000 shares of...
D. Duck Company was authorized to issue 100,000 shares of $6-par value common stock and 80,000 shares of $90-par value preferred stock. Give the general journal entry required in the attached workpaper to record the issue of 50,000 shares of common stock for $18 per share cash. D. Duck Company was authorized to issue 100,000 shares of $6-par value common stock and 80,000 shares of $90-par value preferred stock. Give the general journal entry required in the attached workpaper to...
Tamarisk, Inc.’s December 31, 2020 balance sheet showed the following: 6% preferred stock, $20 par value,...
Tamarisk, Inc.’s December 31, 2020 balance sheet showed the following: 6% preferred stock, $20 par value, cumulative, 40000 shares authorized; 25000 shares issued $ 500000 Common stock, $10 par value, 3,000,000 shares authorized; 1,950,000 shares issued, 1,920,000 shares outstanding 19200000 Paid-in capital in excess of par value - preferred stock 50000 Paid-in capital in excess of par value - common stock 27700000 Retained earnings 9150000 Treasury stock (30,000 shares) 450000 Tamarisk declared and paid a $80200 cash dividend on December...
Case A: The charter for Rogers, Incorporated, authorized the following stock: Common stock, $10 par value,...
Case A: The charter for Rogers, Incorporated, authorized the following stock: Common stock, $10 par value, 109,000 shares authorized Preferred stock (noncumulative), 9 percent, $8 par value, 4,600 shares authorized The company sold 43,000 shares of common stock and 3,600 shares of preferred stock. During the year, the following selected transactions were completed in the order given: Required: 1. Rogers declared and paid dividends in the amount of $16,000. How much was paid to the holders of preferred stock? How...
(c) What is the par value of the preferred stock? The par value of the preferred stock $ 103 per share (d) If the annual dividend on preferred stock is $41,097, what is the dividend rate on preferred stock? The dividend rate 7.21 % (e) If dividends of $73,200 were in arrears on preferred stock, what would be the balance reported for retained earnings? The Retained Earnings balance $ 1163700 e Textbook and Media Attempts: 1 of 3 used Save...
1. BonitaCorp. issues 2800 shares of $10 par value common stock
at $15 per share. When the transaction is recorded, credits are
made to
Common Stock $28000 and Retained Earnings $14000.
Common Stock $28000 and Paid-in Capital in Excess of Par
$14000.
2. VaughnCompany is authorized to issue 9000 shares of 7%, $100
par value preferred stock and 532000 shares of no-par common stock
with a stated value of $1 per share. If Vaughn issues 4500 shares
of preferred stock...
$ - Safari Fusion reported shareholders' equity as follows: Preferred stock, $10.00 par value Authorized 10,000 shares, issued-None Common stock, $1 par value Authorized 30,000 shares, issued 15,000 shares Capital in excess of par value Retained earnings 15,000 45,000 90,000 150,000 (16,000) $114,000 Total paid-in capital Less: Treasury stock, at cost (2,000 common shares) Total stockholders' equity Requirements 1. What was the average issue price per share of the common stock? 2. Journalize the issuance of 1,000 shares of common...
Preferred stock- $25 par value, 10,eee shares authorized, 6,800 shares issued and outstanding Common stock-$10 par value, 100,00e shares authorized, 80,0e0 shares issued and outstanding Total paid-in' capital Retained earnings Total stockholders' equity $ 170, eee 800,e00 $ 970,000 550,e00 $1,520,000 The number of issued and outstanding shares of both preferred and common stock have been the same for the last two years Dividends on preferred stock are 8 percent of par value and have been paid each year the...
D. Duck Company was authorized to issue 100,000 shares of $6-par value common stock and 80,000 shares of $90-par value preferred stock. Give the general journal entry required in the attached workpaper to record the issue of 50,000 shares of common stock for $18 per share cash. D. Duck Company was authorized to issue 100,000 shares of $6-par value common stock and 80,000 shares of $90-par value preferred stock. Give the general journal entry required in the attached workpaper to...
Case A: The charter for Rogers, Incorporated, authorized the following stock: Common stock, $10 par value, 109,000 shares authorized Preferred stock (noncumulative), 9 percent, $8 par value, 4,600 shares authorized The company sold 43,000 shares of common stock and 3,600 shares of preferred stock. During the year, the following selected transactions were completed in the order given: Required: 1. Rogers declared and paid dividends in the amount of $16,000. How much was paid to the holders of preferred stock? How...
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