Reporting Stockholders’ Equity with Treasury Stock
Early in 2013, Feller Corporation was formed with authorization to issue 50,000 shares of $1 par value common stock. All shares were issued at a price of $8 per share. The corporation reported net income of $95,000 in 2013, $27,500 in 2014, and $75,700 in 2015. No dividends were declared in any of these three years.
In 2014, the company purchased its own shares for $35,000 in the open market. In 2015, it reissued all of its treasury stock for $40,000.
Instructions
a. Prepare the stockholders’ equity section of the balance sheet at December 31, 2015. Include a supporting schedule showing your computation of retained earnings at the balance sheet date. (Hint: Income increases retained earnings.)
b. As of December 31, compute the company’s book value per share of common stock.
c. Explain how the treasury stock transactions in 2014 and 2015 were reported in the company’s statement of cash flows.
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