Choose the Appropriate Letter to Match the Description with the Purpose

question 11

Essay

Choose the appropriate letter to match the description with the purpose and accounting effect of the type of stock transaction.Some letters will appear in more than one column and not all letters will necessarily be used.Some blanks will require more than one letter.

A.To obtain shares to reissue to employees as part of employee stock purchase plans.
B.To increase the number of shares outstanding and decrease the per-share market price while managing a company that you expect will struggle financially in the future.
C.To reduce the number of outstanding shares to increase per-share measures of earnings.
D.To increase the number of shares outstanding and decrease the per-share market price while signaling to financial statement users that the company expects significant future earnings.
E.To obtain shares that can be reissued as payment for purchases of other companies.
F.To send a signal to investors that the company itself believes its own stock is worth acquiring.
G.Reduces stockholders' equity.
H.Changes par value per share.
I.Changes Additional Paid-in Capital account balance.
J.Reduces Retained Earnings.
K.Does not affect any of the account balances that comprise stockholders equity.

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Definitions:

General Supply

Refers to the overall provision or stock of resources, goods, or equipment that is available for use.

Managed by Shareholders

An organizational structure in which the owners (shareholders) of a firm take an active role in the management decisions.

Legal Entity

An organization or business that has legal rights and obligations, including the ability to enter into contracts and sue or be sued.

Sued and to Sue

Refers to the legal capacity of an individual or entity to bring a lawsuit or to be subject to a lawsuit in a court of law.