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 =