Module 8 l equity Recognition and Owner Financin 8-38 E8-45. Analyzing and Compu
ID: 2577888 • Letter: M
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Module 8 l equity Recognition and Owner Financin 8-38 E8-45. Analyzing and Computing Issue Price, Treasury Stock Cost, and Shares Outstanding (LO1) Following is the stockholders' equity section of the 2012 Caterpillar Inc., balance sheet. CATERPILLAR INC (CAT) Stockholders' Equity (S millions) 2012 2011 2010 Common stock of $1.00 par; Authorized shares: 2,000,000,000; Issued shares (2012, 2011, and 2010-814,894,624) $4,481 4,273 $3,888 Treasury stock (2012: 159,846,131;2011: 167,361,280 shares; Accumulated other comprehensive income (loss). . . . . . . . . . . . . Noncontrolling interests. (6,433) 50 (6,328) 46 (4,051) 40 a. How many shares of Caterpillar common stock are outstanding at year-end 2012? b. What does the phrase "at paid-in amount" in the stockholders' equity section mean? c. At what average cost has Caterpillar repurchased its stock as of year-end 2012? d. Why would a company such as Caterpillar want to repurchase its common stock? e. Explain how CAT's "issued shares" remains constant over the three-year period while the dollar amount of its common stock account increases.Explanation / Answer
a. Shares of common stock outstanding at year-end 2012 =655,048,493
Issued shares :814,894,624
Less: Treasury stock 2012 :159,846,131
Shares of common stock outstanding : 655,048,493
b. The term paid in means the amount paid on the shares at the time of issue of the shares.
Normally shares are issued at a price higher than the par value (or face value). The amount which is paid on the shares is shown as paid in value of the shares.
c. The repurchase price of the treasury stock as of year end - 2012 =$63.02
Value of treasury stock $10,074,000,000
Number of treasury stock shares 159,846,131
The repurchase price paid by the company = $63.02
d. Companies go for repurchase of their shares primarily because they feel that the shares are undervalued and to reduce the shares which are outstanding, so that the shares pricing is imrpoved.
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