Accounting for stock issuance, splits, and treasury stock

(Learning Objectives 3, 5, & 6) 20–25 min.

Consider each of the following transactions separately from every other transaction:

a. Issuance of 40,000 shares of $8 par common at $12.

b. Purchase of 2,100 shares of treasury stock (par value $0.75) at $2 per share.

c. Issuance of a 15% stock dividend. Before the dividend, 300,000 shares of $5 par common stock were outstanding; market value was $7 at the time of the dividend.

d. Sale of 450 shares of $3 par treasury stock for $7 per share. Cost of the treasury stock was $5 per share.

e. Split stock 4-for-1. Prior to the split, 120,000 shares of $4 par common were outstanding.

Requirement 1. Identify whether each transaction increased, decreased, or did not change total stockholders’ equity.

AppendixLO1