Question

The corporate charter of Martin Corporation allows the issuance of a maximum of 4,000,000 shares of $1 par value common stock. During its first three years of operation, Martin issued 3,200,000 shares at $15 per share. It later acquired 30,000 of these shares as treasury stock for $25 per share. Based on the above information, answer the following questions: How many shares were authorized

Answer 1

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The corporate charter of Martin Corporation allows the issuance of a maximum of 4,000,000 shares of $1 par value common stock. During its first three years of operation, Martin issued 3,200,000 shares at $15 per share. It later acquired 30,000 of these shares as treasury stock for $25 per share. Based on the above information, answer the following questions:

a. How many shares authorized?

b. How many shares were issued?

c. How many shares are outstanding?

d. What is the balance of the Common Stock account?

e. What is the balance of the Treasury Stock account?

Answer:

(a) 4,000,000 shares

(b) 3,200,000 shares

(c) 3,170,000 shares

(d) $3,200,000

(e) $750,000

Explanation:

(A) Number of shares that was authorized is 4,000,000

(B) Number of shares that was issued is 3,200,000

(C) The number of shares outstanding can be calculated as follows

= number of shares issued-acquired shares in the treasury stock

= 3,200,000-30,000

= 3,170,000

(D) The balance of common stock account can be calculated as follows

= number of shares that was issued-per value

= 3,200,000×$1

= $3,200,000

(E) The balance of the treasury stock account can be calculated as follows

= acquired shares in the treasury stock×price per share

= 30,000×$25

= $750,000