Accounting for Share Transactions The shareholders’ equity section of the consol
ID: 2445567 • Letter: A
Question
Accounting for Share Transactions
The shareholders’ equity section of the consolidated balance sheet of CompX International appeared as follows at the beginning of the year:
The following events occurred sequentially during the year:
A 2-for-1 forward stock split was executed.
A ten percent stock dividend was distributed when the CompX share price was $20 per share.
Treasury stock valued at $3,000,000 was repurchased when the CompX share price was $15 per share.
Required
1. How many Class A common shares are outstanding following the above events?
2. Prepare a spreadsheet to illustrate the financial effects associated with the above three share transactions. Round answers to nearest whole number.
Shareholders’ Equity Class A common stock, $0.01 par value; 20,000,000 shares authorized; 6,100,000 shares issued $61,000 Additional paid-in-capital 118,127,000 Retained earnings 14,270,000 Currency translation adjustment (2,412,000) Total equity $130,046,000Explanation / Answer
Question 1. Quantity Rate Amount Beginning Common Stock 6,100,000.00 0.01 $ 61,000.00 2 for 1 stock split 12,200,000.00 0.005 $ 61,000.00 Add: 10% stock Dividend 1,220,000.00 0.005 6,100.00 Stock Available 13,420,000.00 0.005 67,100.00 Less: Treasury Stock Purchased (3,000,000/$15) 200,000.00 0.005 1,000.00 Outstanding Common Stock 13,220,000.00 0.005 66,100.00 Answer: 13,220,000 common stock Question 2 CompX International Transaction Balance Stock Stock Share Sheet Split Dividend Repurchase Totals Assets Cash $ - $ - $ (3,000,000.00) $ (3,000,000.00) Shareholders’ Equity Common stock $ - $ (6,100.00) $ (6,100.00) APIC $ - $ - Retained earnings $ - $ 6,100.00 $ 6,100.00 Treasury stock $ - $ 3,000,000.00 $ 3,000,000.00 Total Shareholders’ Equity $ -