Question

Dorado Company is authorized to issue 1,000,000 shares of common stock. They issued 400,000 shares of $5 par value stock for $18 per share. They repurchased 100,000 shares at $20 per share and reissued 20,000 of the Treasury shares at $22 per share. Assuming no shares were retired, what is the number of shares outstanding?

a. 300,000 shares

b. Cannot be determined based on the information given

c. 900,000 shares

d. 380,000 shares

e. 320,000 shares

Answer 1

Solution:
	Answer is e. 320,000 shares
Working Notes:
	The number of shares outstanding
	= No of shares total issued -Treasury stock + Treasury stock reissued
	=400,000 -100,000 + 20,000
	=320,000 shares
Notes:	Outstanding shares are those shares are issued and are in hands of share holders of the company.
Notes:	Authorized to issue 1,000,000 shares of common stock means company can issued 1,000,000 shares but it had issued only 400,000 shares hence only 400,000 shares will be considered for computation of outstanding shares.
	100,000 share repurchased are called treasury stock and it will not be count in outstanding in fact it will be reduced from issued shares to get outstanding shares as it will reduced number of shares in market.
	Reissued treasury stock 20,000 shares are added to issued to get outstanding number shares as it will increase the number of shares outstanding in the market.
Hence,	The number of shares outstanding
	= No of shares total issued -Treasury stock + Treasury stock reissued
Please feel free to ask if anything about above solution in comment section of the question.