Homework Answers
1. Number of Class A shares outstanding as of 31st December 2011
| Number of shares issued | 98,333,454 |
| Less: Number of shares in Treasury | 25,139,548 |
| Number of shares outstanding | 73,193,906 |
2. Shares purchased in Treasury stock in 2011
| Shares in Treasury stock as of 31st December 2011 (A) | 25,139,548 |
| Shares in Treasury stock as of 31st December 2010 (B) | 23,834,081 |
| Shares reissued from Treasury stock in 2011 (C) | 0 |
| Shares purchased as Treasury stock in 2011 (D) (=A-B+C) | 1,305,467 |
3. Average cost per share purchased in treasury stock in 2011 ($)
| Cost of Treasury stock as of 31st December 2011 (A) | 720,495,000 |
| Cost of Treasury stock as of 31st December 2010 (B) | 688,324,000 |
| Cost of Treasury stock purchased in 2011 (C) (=A-B) | 32,171,000 |
| Number of shares purchased in treasury stock in 2011 (D) (as per 2 (D) above) | 1,305,467 |
| Average cost per share purchased (E) (=C/D) | 24.64 |
4. Journal entry for issue of shares in 2011
Working:
| Particulars | Number of shares issued | Par value ($) | Additional paid in capital ($) |
| As of 31st December 2011 (A) | 98,333,454 | 983,000 | 1,023,405,000 |
| As of 31st December 2010 (B) | 97,436,947 | 975,000 | 979,177,000 |
| For 2011 (=A-B) | 896,507 | 8,000 | 44,228,000 |
The actual increase in the par value during 2011 would be 896507 * 0.01 = 8,965. Hence, we use this number in stead of $ 8,000 as per table above as it could be incorrect due to rounding off effect.
The Journal entry shall be as follows:
| Particulars | Dr. | Cr. |
| Cash | 44,236,965 | |
| Class A common stock at par | 8,965 | |
| Additional paid in capital - Class A | 44,228,000 |
(Being issue of fresh Class A shares at a premium)
5. To meet the additional capital requirement in 2012, the Company can consider both the alternatives - issue of fresh shares as well sale of Treasury stock. However, the cost of fresh issue is likely to be more than the the sale of treasury stock. Hence, sale of treasury would be more appropriate.
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