The authorized share capital of the Alfred Cake Company is 110,000 shares. The e

Question

The authorized share capital of the Alfred Cake Company is 110,000 shares. The equity is currently shown in the company's books as follows: COMMON STOCK ($2 par value) =$79,000: ADDITIONAL PAID-IN CAPITAL = $29,000: RETAINED EARNINGS = $49,000 AND ALL TOTAL TOGETHER IS $157,000: COMMON EQUITY, TREASURY STOCK (4,000 shares) =$23,000 and Net Common Equity is $134000. (a). Suppose that the company issues 29,000 shares at $5 a share. Construct the revised equity accounts Common stock $______; additional paid-in capital $_______; Retained earnings $_________; Common equity $________; Treasury stock $_______; and Net common equity $_______. (b) What would happen to the company's books if instead it bought back 11,000 shares at $5 per share? Construct the revised equity accounts. Common stock $_________; Additional paid-in capital $_________, Retained earnings $_________; Common Equity $______, Treasury stock $________ and Net common equity $______.

Explanation / Answer

(a)The revised equity accounts Common stock $137000; additional paid-in capital $116000; Retained earnings $49000; Common equity $302000; Treasury stock $23000; and Net common equity $279000.

(b) The revised equity accounts. Common stock $57000; Additional paid-in capital $Nil Retained earnings $45000; Common Equity $102000, Treasury stock $23000 and Net common equity $79000.

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