In: Accounting
(In $Millions)
Common Stock ($1 par) $80
Paid-in-capital; excess of par 1,120
Retained earnings 1,425
Treasury Stock, at cost (6 million shares) (150)
Total Shareholders’ Equity $2,475
a. Common Stock (6 million * $1) ..........................................DR. $6,000,000
Paid-in-Capital excess of par [6 million * ($15 - $1)].........DR. $84,000,000
Retained Earnings [6 million * ($25 - $15)] ......................DR. $60,000,000
Treasury Stock ..............................................................................CR. $150,000,000
Working Note:
Purchase price of treasury stock = $150,000,000 / 6 million shares
= $25
Total number of shares outstanding = common stock / par value
= $80,000,000 / $1
= 80 million
Issue Price of shares = (common stock + paid-in-capital excess of par) / 80 million shares
= ($80,000,000 + $1,120,000,000) / 80 million shares
= $15
b. Any Change in the accounting principle should be properly disclosed in the financial statements of the company. The change and effect of the change shall be disclosed in the financial statement by UMC.