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CHAPTER 14 LONG-TERM FINANCING: AN INTRODUCTION Basic 1. a. Since the common stock entry in the balance sheet represents the total par value of the stock, simply divide that by the par per share: Shares outstanding = $165,320 / $0.50 Shares outstanding = 330,640 b. Capital surplus is the amount received over par, so capital surplus plus par gives you the total dollars received. In aggregate, the solution is: Net capital from the sale of shares = Common Stock + Capital Surplus Net capital from the sale of shares = $165,320 + 2,876,145 Net capital from the sale of shares = $3,041,025 Therefore, the average price is: Average price = $3,041,465 / 330,640 Average price = $9.20 per share Alternatively, you can do this per share: Average price = Par value + Average capital surplus Average price = $0.50 + $2,876,145 / 330,460 Average price = $9.20 per share c. The book value per share is the total book value of equity divided by the shares outstanding, or: Book value per share = $5,411,490 / 330,640 Book value per share = $16.37 2. a. The common stock account is the shares outstanding times the par value per share, or: Common stock = 500($2) Common stock = $1,000 So, the total equity account is: Total equity = $1,000 + 250,000 + 750,000
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This note was uploaded on 10/24/2008 for the course FIN 396002 taught by Professor Na during the Spring '08 term at Auckland University of Technology.

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