Question

Common stock balance sheet disclosure : The balance sheet caption for common stock is the following:

Common stock, $5 par value, 2,330,000 shares authorized.
1,570,000 shares issued, 1,030,000 shares outstanding.

Required:
a. Calculate the dollar amount that will be presented opposite this caption.
b. Calculate the total amount of a cash dividend of $0.18 per share.
c. What accounts for the difference between issued shares and outstanding shares?

Answer 1

A) $5,150,000

B) $185,400

C) Treasury Stock

Step-by-step explanation:

a)

Total outstanding shares are recorded at their par value

Par value = 1,030,000 * 5 = $5,150,000

b)

Total cash dividend is also payable only on the outstanding shares calculated as 1,030,000 * 0.18 = $185,400

c)

The difference is of 1,570,000 - 1,030,000 = 540,000 shares

this is the number of shares held in the treasury stock portion of the company as these are currently held and owned by the issuing company. They are not liable for dividends unless re-issued.

Hope that helps.