Suppose that Dow Chemical now issues 30 million shares at $30 a share. What will
ID: 2720009 • Letter: S
Question
Suppose that Dow Chemical now issues 30 million shares at $30 a share. What will be the new account values? (Leave no cells blank - be certain to enter "0" wherever required. Negative amounts should be indicated by a minus sign. Enter your answers in millions of dollars.)
What would happen to the book value of common stockholders’ equity if instead Dow bought back 15 million shares at $46 per share? (Negative amounts should be indicated by a minus sign. Enter your answers in millions of dollars.)
Book value of common stockholders’ equity of Dow Chemical, December 31, 2012 (figures in $ millions).Explanation / Answer
(a) Journal entry for issue of common stock will be as follows
BanK A/c Dr. 900
To Common Stock 30
To additional paid in capital 870
(b)Journal entry for buy back of shares will be as follows
Treasury stock A/c Dr. 690
To Bank A/c Dr. 690
Particulars Amount ($) Common stock 3052 Additional Paid in capital 4165 Retained earnings 18509 Treasury Stock 0 Other -7921 Net common Equity 17805