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Analyzing and Computing Average Issue Price and Treasury Stock Cost Following is the stockholders’ equity section...

Analyzing and Computing Average Issue Price and Treasury Stock Cost
Following is the stockholders’ equity section from the Campbell Soup Company balance sheet. (Note: Campbell’s uses shareowners’ equity in lieu of the more common title of stockholders’ equity.).

Shareholders' Equity (millions, except per share amounts) July 31, 2016 August 2, 2015
Preferred stock: authorized 40 shares; non issued $ -- $ --
Capital stock, $.0375 par value; authorized 560 shares;
issued 323 shares 12 12
Additional paid-in capital 354 339
Earnings retained in the business 1,927 1,754
Capital stock in treasury, at cost (664) (556)
Accumulated other comprehensive loss (104) (168)
Total Campbell Soup Company shareowners’ equity 1,525 1,381
Noncontrolling interests 8 (4)
Total equity $1,533 $1,377


Campbell Soup Company also reports the following statement of stockholders' equity.

Campbell Soup Company
(Millions, except per share amounts) Additional
Paid-in Capital
Earnings
Retained in
the Business
Accumulated
Other
Comprehensive
Income (Loss)

Noncontrolling
Interests

Total
Equity

Issued In Treasury
Shares Amount Shares Amount
Balance at August 2, 2015 323 $12 (13) $(556) $339 $1,754 $(168) $(4) $1,377
Contribution from noncontrolling interests -
Noncontrolling Interests Other Activity 9 9
Net earnings (loss) 563 563
Other comprehensive income (loss) 64 3 67
Dividends ($1.248 per share) (390) (390)
Treasury stock purchased (3) (143) (143)
Treasury stock issued under management
incentive and stock option plans
1 35 15 50
Balance at July 31, 2016 323 $12 (15) $(664) $354 $1,927 $(104) $8 $1,533


(a) Campbell Soup Company reports $12 million in its Common Stock account. Which of the following statements best describes the manner in which this number is computed?

The computation uses the number of issued shares multiplied by the par value of the stock.

The computation uses the number of issued shares multiplied by the market value of the stock.

The computation uses the number of outstanding shares multiplied by the market price of the stock.

The computation uses the number of outstanding shares multiplied by the par value of the stock.



(b) At what average price were the Campbell Soup shares issued? (Round your answer to two decimal places.)
$Answer

(c) Reconcile the beginning and ending balances of retained earnings.

(Enter any deductions as negative numbers)

($ millions)
Retained earnings, August 2, 2015 $Answer
Net earnings Answer
Dividends Answer
Miscellaneous Answer
Retained earnings, July 31, 2016 $Answer


(d) Campbell Soup reports an increase in stockholders' equity relating to the exercise of stock options (titled "Treasury stock issued under management incentive and stock option plans"). This transaction involves the purchase of common stock by employees at a preset price. Which of the following statements best describes the nature of this transaction?

The exercise of employee stock options resulted in the issuance of 1 million shares of stock for a total of $50 million that was recognized as a gain on sale, thus increasing Retained Earnings.

The exercise of employee stock options resulted in the issuance of 1 million shares of stock for a total of $50 million that was recognized as a reduction of Treasury Stock and an increase in Additional Paid-In Capital.

The exercise of employee stock options resulted in the issuance of 1 million shares of stock for a total of $50 million that was recognized as an increase in the Common Stock and in the Additional Paid-In Capital.

The exercise of employee stock options resulted in the issuance of 1 million shares of stock for a total of $50 million that was recognized as an increase in the Common Stock account only.



(e) Which of the following statements best describes the transaction relating to the "Treasury stock purchased" line in the statement of stockholders' equity?

Campbell Soup repurchased 3 million shares of common stock for a total of $143 million. The effect of the repurchase of stock is to recognize a loss on the repurchase, thus reducing Cash and Retained Earnings.

Campbell Soup repurchased 3 million shares of common stock for a total of $143 million. This transaction had no effect on the components of Stockholders' Equity.

Campbell Soup repurchased 3 million shares of common stock for a total of $143 million. The effect of this transaction is to increase Stockholders' Equity.

Campbell Soup repurchased 3 million shares of common stock for a total of $143 million. The effect of the repurchase of stock is to reduce Cash and Stockholders' Equity.

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