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Q: Finance & Accounting ( Answered 5 out of 5 stars,   0 Comments )
Subject: Finance & Accounting
Category: Business and Money > Accounting
Asked by: trishellew-ga
List Price: $10.00
Posted: 18 May 2005 17:21 PDT
Expires: 17 Jun 2005 17:21 PDT
Question ID: 523129
Equity Accounts. The authorized share capital of the Alfred Cake
Company is 100,000 shares.  The equity is currently shown in the
company?s books as follows:

Common stock ($1.00 par value)	 $60,000
Additional paid-in capital       10,000
Retained earnings 	 	 30,000
Common equity 			 100,000
Treasury stock (2,000 shares) 	 5,000
Net common equity 	         95,000

a. How many shares are issued?
b. How many are outstanding?
c. How many more shares can be issued without the approval of shareholders?

Clarification of Question by trishellew-ga on 18 May 2005 17:37 PDT
Can this be answered before 9pm please.  Thanks.
Subject: Re: Finance & Accounting
Answered By: omnivorous-ga on 19 May 2005 05:01 PDT
Rated:5 out of 5 stars
Trishellew --

A. There are 100,000 shares AUTHORIZED but only 60,000 have been
ISSUED at $1 par value.   Apparently all 60,000 were issued at $1.167
per share ? that?s how $10,000 shows up in the ?additional paid up

B. At some time after issuing the shares, the company bought back
2,000 shares at $2.50 per share ? giving the Treasury 2,000 shares
with a value of $5,000.  OUTSTANDING = 60,000 ? 2,000 = 58,000 shares.

C. The Treasury shares can be sold (and often are to company officers
under stock option plans) ? or the company can issue an additional
40,000 shares, bringing it up to the authorized level of 100,000

So, it may seem a little confusing but there are an additional 40,000
shares that can be issued ? but 42,000 shares that the company could


There are several Merrill Lynch publications that are excellent in
going through annual reports and financial statements.  The first has
been published and updated for decades (and I think that I?m on my
third copy, as it?s an excellent desk resource):

Merrill Lynch
?How to Read a Financial Report? (undated)

Pages 20-22 cover the Shareholder Equity portion of the financial statements.

The second is ?Understanding Financial Reports,? which provides a
little more perspective on how financial statements have evolved:

?Understanding Financial Reports,? (2003)

Google search strategy:
?How to Read a Financial Report? Merrill Lynch

Best regards,

trishellew-ga rated this answer:5 out of 5 stars
Very good thorough information and explanation!!

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