The authorized share capital of the Alfred Cake Company is 100,000 shares. The equity is currently shown in the company’s books as follows:
Common stock ($.50 par value) | $40,000 |
Additional paid-in capital | 10,000 |
Retained earnings | 30,000 |
Common equity | 80,000 |
Treasury stock (2,000 shares) | 5,000 |
Net common equity | $75,000 |
a. How many shares are issued?
b. How many are outstanding?
c. Explain the difference between your answers to (a) and (b).
d. How many more shares can be issued without the approval of shareholders?
e. Suppose that Alfred Cake issues 10,000 shares at $2 a share. Which of the above figures would be changed?
f. Suppose instead that the company bought back 5,000 shares at $5 a share. Which of the above figures would be changed?
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