Question

In: Accounting

Eugene Inc.’s statement of stockholders’ equity on December 31, 2019 is as follows: Common stock, $1...

Eugene Inc.’s statement of stockholders’ equity on December 31, 2019 is as follows: Common stock, $1 par, 500,000 shares authorized; 375,000 shares issued $375,000 Paid-in capital in excess of par - Common stock 1,875,000 Retained earnings 780,000 Treasury stock, 40,000 shares (320,000) Total stockholders’ equity $2,660,000

The following transactions occurred during 2020:

Apr 25 Issued 50,000 shares of common stock for $9 per share.

Jun 15 Sold 10,000 shares of treasury stock for $11 per share. Oct 24 Repurchased 15,000 shares of common stock at $12 per share.

Nov 30 Declared 10% stock dividends while market price was $12 per share.

Required:

a)What was the number of common shares issued on December 31, 2019?

b) What was the average common stock issuing price on December 31, 2019?

c) What was the number of common shares outstanding on December 31, 2019?

d) Prepare necessary journal entries to record the 2020 stockholders’ equity related transactions.

Expert Solution

Answer to Part a.
Number of Common Shares issued on December 31, 2019 = 375,000 Shares

Answer to Part b.
Average Common Stock issuing price = (Common Stock + Paid-in Capital in excess of Par) / Common Stock issued
Average Common Stock issuing price = ($375,000 + $1,875,000) / 375,000
Average Common Stock issuing price = $2,250,000/ 375,000
Average Common Stock issuing price = $6.00

Answer to Part c.
Number of Common Shares Outstanding = Common stock issued – Treasury Stock
Number of Common Shares Outstanding = 375,000 – 40,000
Number of Common Shares Outstanding = 335,000 shares

Calculation:
June 15:
Cost of Treasury Stock per share = $320,000 / 40,000
Cost of Treasury Stock per share = $8

Nov 30:
Common Stock Outstanding = 375,000 + 50,000 + 10,000 – 15,000
Common Stock Outstanding = 420,000 Shares

No. of Common stock declared as Dividend = 420,000 * 10%
No. of Common stock declared as Dividend = 42,000 shares

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