Question

Rudd Corp. had 700,000 shares of common stock authorized and 300,000 shares outstanding at December 31, 2016. The following events occurred during 2017:

January 31 Declared 10% stock dividend
June 30 Purchased 100,000 shares
August 1 Reissued 50,000 shares
November 30 Declared 2-for-1 stock split
At December 31, 2017, how many shares of common stock did Rudd have outstanding?

Answer 1

Rudd Corp had 560,000 shares of common stock outstanding at December 31, 2017, after accounting for stock dividends, share purchases, reissues, and a stock split.

Step-by-step explanation:

To determine the number of shares of common stock Rudd Corp had outstanding at December 31, 2017, we need to consider the events that occurred during 2017.

1. January 31: Declared a 10% stock dividend. This means that for every 10 shares owned, an additional share was given as a dividend.
2. June 30: Purchased 100,000 shares. This means that Rudd Corp bought these shares back from the market.
3. August 1: Reissued 50,000 shares. This means that Rudd Corp sold these shares that they had previously bought back.
4. November 30: Declared a 2-for-1 stock split. This means that each share of stock is now split into two.

Starting with the initial 300,000 shares outstanding, let's calculate the effect of each event:

• 10% stock dividend: 300,000 shares + (10% x 300,000 shares) = 330,000 shares
• Purchased 100,000 shares: 330,000 shares - 100,000 shares = 230,000 shares
• Reissued 50,000 shares: 230,000 shares + 50,000 shares = 280,000 shares
• 2-for-1 stock split: 280,000 shares x 2 = 560,000 shares

Therefore, at December 31, 2017, Rudd Corp had 560,000 shares of common stock outstanding.