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Economically par value has little significance par

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Unformatted text preview: 000 shares, the par value per share must be $6. b. Book Value = (Total Stockholders' Equity – Contributed Capital from Preferred Stockholders) ÷ Number of Common Shares Outstanding = [($840,000 – $300,000) ­ $50,000] ÷ 45,000 Shares = $10.89 P12–2 Concluded c. Since 50,000 shares have been issued, and only 45,000 shares are outstanding, 5,000 shares are held in treasury. The balance of $40,000 in treasury stock represents the cost of these 5,000 shares. Consequently, the average price of the treasury stock was $8. d. If the company reissues the treasury stock at $10 per share, stockholders' equity would increase by $50,000 and the company would make the following entry. Cash (+A) 50,000 Treasury Stock (+SE) 40,000 Additional Paid­In Capital, Treasury Stock (+SE) 10,000 Reissued treasury stock. Debt/equity ratio The company's debt/equity ratio is calculated as Total Debt ÷ Total Stockholders' Equity. This ratio would decrease, because the numerator would be unchanged, while the denominator would in...
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