BUSI W3013 Solution to Problem Set 08 | Page 1FINANCIALACCOUNTINGBUSI W3013 | FALL2009SOLUTION TOPROBLEMSET08PROFESSORANDREWSCHMIDTAnswers in $thousands (except share amounts) 1.The number of authorized shares on 12/31/05 was 200,000,000. 2.The number of issued shares on 12/31/05 was 69,153,000. 3.The number of outstanding shares on 12/31/05 was 69,153,000. 4.Treasury stock. This item is missing (apparently) because OO retires repurchased shares immediately, rather than holding the shares in the treasury. 5.The market value of equity was $1,015,857.570 ($14.69 * 69,153,000). 6.The book value of equity was $421,205. 7.The book value per share was $6.09 (421,205,000/69,153,000). 8.The price-to-book ratio was 2.41 ($14.69/$6.09). 9.Par value per share = $0.01. 10.$686. 11.$48,026. 12.OO repurchased 865,000 shares in 2005. All of the shares were retired, because there is no treasury stock account and the statement of shareholders’ equity (SSE) indicates that the share repurchase reduced common stock (by $9) and APIC (by $11,779). 13.In 2005 (2004), OO paid $11,788 ($5,923) to repurchase common stock. 14.In preparing the equity section of the balance sheet, I am assuming that all treasury shares repurchased prior to 2004 were retired (i.e., the 2004 BB of treasury stock = 0), and none of the treasury shares were reissued. According to the SSE, OO repurchased 515,000 shares in 2004 (at a cost of $5,923) and 865,000 shares in 2005 (at a cost of $11,788). Therefore, the EB of treasury stock in 2004 should be $5,923 and the EB of treasury stock in 2005 should be $17,111 (5,923 + 11,788). There should be 515,000 shares in the treasury in 2004 and 1,380,000 shares in the treasury in 2005 (515,000 + 865,000).
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