Question
Thurston Howell IV is the sole heir to the Howell Enterprise fortune. He does not participate in the business, preferring to tend to his comic
Thurston Howell IV is the sole heir to the Howell Enterprise fortune. He does not participate in the business, preferring to tend to his comic book collection. He does however own a large piece of the company
Recently he had become concerned about how the company has performed specifically related to some transactions relating to stockholders equity.
Here is the data relating to stockholders equity:
Howell Enterprises
Stockholders Equity
As of December 31, 2019
Common Stock, 2,000,000 shares outstanding 10,000,000
Retained Earnings 7,500,000
Total Stockholders Equity 17,500,000
Thurston currently owns 300,000 shares of Howell Enterprises
Here are the relevant transactions for 2020:
- The company issued 500,000 shares @ $8.00 per share
- The company purchased 100,000 shares @ $15 per share
- The company declared a $2.50 per share cash dividend
- The company declared a 2:1 stock split
Required
- Calculate the book value per share as of December 31, 2019. (total equity / number of shares outstanding)
- Calculate the total value of Thurston Howell IVs stock as of December 31, 2019. (his shares x book value per share)
- Calculate the percentage of the company that Mr. Howell owns as of December 31, 2019. (his shares / total number of shares outstanding)
- Prepare journal entries for the transactions listed above
- Calculate the ending balances in the equity accounts
- Calculate the book value per share after the transactions have been recorded
- Calculate the total value of Thurston Howell IVs stock after the transactions have been recorded. (his shares x new book value per share)
- Calculate the percentage of the company that Mr. Howell owns after the transactions have been recorded. (his shares x new total outstanding shares).
- Calculate the amount of loss that Mr. Howell has suffered (if any) as a result of the above transactions. (compare #2 to # 7).
- Write a summary in Word explaining your results. Which transactions caused Mr. Howell to lose money?
Record the transactions for 2020 and calculate the ending balances in all of the stockholders equity accounts.
Please organize the answers.
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| Ending Balances |
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| Common Stock |
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| Retained Earnings |
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| Treasury Stock |
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| Total Equity |
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| # of Shares Outstanding |
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| Book Value Per Share |
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Mr. Howells Investment
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| Before Transactions | After Transactions |
| Book Value Per Share |
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| Total Value of Stock |
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| % of Company Owned |
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Turn in the summary with this page
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Auditing Fundamentals In A South African Context
Authors: Gerrit Penning, Rika Butler, Pieter Von Wielligh, Frans Prinsloo
2nd Edition
0190749040, 978-0190749040
