T reas ury s hares s old above c os t , s uppos e that on Nov 25 the 1,000

B- T reas ury s hares s old above c os t , s uppos e that on Nov 25 the 1,000

treas ury s hares of the C aproc k C orporation are s old for $60 per s hare. T he entry for

the reis s ue would be as follows :

T reas ury s toc k, treas ury s toc k

P aid–in c apital, treas ury s toc k

S ale of 1,000 s hares of treas ury s toc k for $60 per s hare, c os t was $50

per s hare

E x a mple: s uppos e that on S e p 15, the C aproc k C orporation bought 10,00 s hares of

its c ommon s toc k on the market at a price of $50 per s hare. T he c ompany s old 400

s hares of its s toc k on O c t 15 for $60 per s hares on remaining 600 s hares on D ec 15

for $42 pe r s ha re. T he e ntries for the s e trans ac tion below:

S ep 15 T reas ury s toc k, c ommon 50,000

C as h 50,000

P urc has e of 1,000 s hares of treas ury s toc k

at $50 per s hare

O c t 15 (400 

60) C as h

T reas ury s toc k, c ommon 20,000

P aid–in c apital, treas ury 4,000

S ale of 400 s hares of treas ury s toc k for

$60 per s hare, c os t wa s $50 per s hare

D ec 15

C as h 25,200

P aid–in c apital, treas ury s toc k 4,000

R etained earning s

T reas ury s toc k, c ommon 30,000

S ale of 600 s hares of treas ury s toc k for

$42 per s hare; c os t was $50 per s hare

3– R etirement of T rea s ury S toc k :

F or example, s uppos e tha t ins tea d of s elling the 1,000 s ha res of treas ury

s toc k it purcha s ed for $50, 000, C aproc k de c ides to retire the s hares on Nov 15.

A s s uming that the $5 par value c ommon s toc k was originally is s ue d at $6 pe r s ha re,

this entry rec ords tha t retirement:

Nov 15

C ommon s toc k

P aid–in c apital in e xc es s of par value,

c ommon 1,000

R etaine d earning s 44,000

T reas ury s toc k, c ommon

50,000

R etirement of 1,000 s hares that

c os t $50 per s hare and were

is s ued orig inally at $6 per s hare

S toc k div idends :

S toc k dividends

L es s than 20%

More than 20%

(market pric e) ( P ar V alue)

E x a mple:

C ontributed c apital

C ommon s toc k $5 pa r value, 100,000 s hares

authoriz ed, 30,000 s hares is s ued and

outs tanding 150,000

P aid in c ap in e xc es s of pa r value

T otal c ontributed cap 180,000

R E 900,000

T otal s toc kholders ’ equity 1,080, 000

E x . S uppos e the c orporation’ s boa rd of direc tors dec lares a 10% s toc k dividend on

F ebruary 24, dis tribute d on Marc h 31 to s toc kholders of rec ord on Marc h 15,

and tha t the market price of the s toc k on F ebrua ry 24 is $20 per s hare.

D ate of d ec laration

S toc k dividend dec lared

5) C ommon s toc k dis tributable 15,000

P aid in c ap in exc es s of par value

30, 000 s hares  10% =

3, 000 s hares

3, 000 s hares  $20 =

D ate of rec ord

No entry

D ate of dis tribution

C ommon s toc k dis tributable

C ommon s toc k

S toc kholders ’ equity

B efore dividend

A fter dividend

C ommon s toc k

T ota l c ontributed c ap

T ota l s toc kholde rs ’ equity

S ha res outs tanding

S toc kholders ’ equity/s hare

E x a mple:

S uppos e in the previous example tha t the board of direc tors dec lared 30%

s toc k dividends entries will as follows :

D ate of de c laration:

S toc k dividend dec lared

5) C ommon s toc k dis tributable 45,000

30, 000 s hares 

9,000 s ha res

9,000 s hares  $5 = 45,000

D ate of rec ord

No entry

D ate of d is trib ution

C ommon s toc k dis tributable

C ommon s toc k

S toc k s plit

* S toc k s plit is inc reas e in number of c ommon s toc k is s ued (outs tanding &

treas ury) and reduc es par or s tated value with the s ame proportion but does not

inc reas e authoriz ed number of s ha res .

* S toc k s plit reduc e market pric e per s ha re & inc reas e c orporation’ s liquidity.

S toc k s plit does not affec t tota l s toc k holde r equity. T here is no double entry

required, only memorandum entry.

E x a mple:

T he following is s toc kholde r equity s ec tion in ba lanc e s he et.

B alanc e S he et

S toc kholder’ s equity

C ontributed c ap

C ommon s toc k $10 par value, 100, 000

s hares ,

A uthoriz ed

30, 000 s hares is s ue d

and outs tanding 300,000

P aid in c ap in exc es s of par 600,000

T ota l c ontributed c ap 900,000

R E 500,000

T ota l s toc kholder’ s equity 1,400, 000

T he c orporation dec lared s toc k s plit 4– for 2 or 2 – for 1

S olution:

is s ued 30, 000  4/2 = 60, 000

P ar value =10  2/4 = 5

Or

is s ued 30, 000  2/1 =60,000

P ar=

B alanc e S he et A fter S toc k S plit

S toc kholder’ s equity

C ontributed c ap

c ommon s toc k 100,000 s hares

300,000

A uthoriz ed 60,000 s hares is s ued

and outs tanding $5 par value per s ha re

P aid in c ap in exc es s of par

600,000

T ota l c ontributed c ap

900,000

500,000

T ota l s toc kholder’ s equity

1,400, 000

Memorandum E ntry

T he 30, 000 s hares of $10 par value c ommon s toc k that are is s ued and

outs tanding were s plit 2– for 1 res ulting 60,000 s hares of $5 par value c ommon s toc k

is s ued and outs tanding.

B ook V alue P er S hare of C ommon S toc k

B ook value / s ha re of c om s toc k =