Chapter 11 - Reporting and Interpreting Owners’ Equity
E11–9.
Stockholders’ Equity
Contributed capital: Preferred stock, 8%, par $50, authorized 59,000 shares, issued and outstanding, 20,000 shares ............................................... $1,000,000 Common stock, par $10, authorized 98,000 shares, issued, 78,000 shares ......................................................................... 780,000 Capital in excess of par, preferred stock ................................................. 600,000 Capital in excess of par, common stock .................................................. 780,000 Treasury stock ..................................................................................... (80,000) Retained earnings* ......................................................................................... 160,000 Total stockholders’ equity........................................................................ *($210,000 – $50,000 = $160,000.) E11–10.
Req. 1
a. Cash (20,000 shares x $20) (+A) .......................................... 400,000 Common stock, no-par (+SE) ............................................ . b. Cash (6,000 shares x $40) (+A) ............................................ 240,000 Common stock, no-par (+SE) ........................................... c.
Cash (7,000 shares x $30) (+A) ............................................ 210,000 Preferred stock (7,000 shares x $10) (+SE) ...................... Capital in excess of par, preferred (+SE) ..........................
400,000 240,000 70,000 140,000
Req. 2
Yes, it is ethical as long as there is a full disclosure of relevant information. In any arm’s
length transaction, an informed buyer will pay the market value of the stock.