Shareholders' Equity
the Shareholders' Equity Section of the Balance Sheet

question 88

Essay

Shareholders' equity
The shareholders' equity section of the balance sheet of Creative Corporation at December 31, 2009, appears as follows:
$\begin{array}{llr} \text { Shareholders'Equity } &\\ \text {5\% ron-cumulative preferenoe share, \$100 par; 10,000 shares authorized, ?shares issued } &800,000\\ \text { Orlinary share, \$3 par, 100,000 shares authorized, 50,000 shares issued, of which ?? are held in treasuy } &150,000\\ \text { Share preminim} &\\ \text {From issuance of plefereme share } &160,000\\ \text { From issuance of ordinary share } &550,000\\\text { From treasuy share trancaction }&6,000\\\text { From ordinary share dividends}&130,000\\ \text { Total issued and fully paid capital } &\$1,796,000\\ \text {Retained eaming: ( \( \$ 40,000 \) equal to cost of treasuy share is not available for dividends) } &750,000\\ &\$2,546,000\\ \text { Less: treasuy share (at cost: 5,000 ordinaryshares) } &(40,000)\\ \text { Total hhareholders' equity } &\$2,506,000\\\end{array}$
Answer the following questions based on the shareholders' equity section given above. The company had no treasury share transactions before 2007.
(a) What is the average price per share of preference share?
(b) How many shares of ordinary share are outstanding?
(c) A small stock dividend of 5,000 shares was declared and distributed during 2007. What was the market price per share on the date of declaration?
(d) If Creative Corporation had reacquired 7,000 shares of treasury share early in 2007, compute the price per share for which the reissued treasury share was sold.
(e) Assume all remaining treasury share is reissued at a price of $12 per share in January of 2008.
Give the journal entry to record this transaction.

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Definitions:

Distributive Property

A property in algebra that allows you to multiply a sum by multiplying each addend separately and then add the results.

Like Terms

Terms in an algebraic expression that have the same variables raised to the same power and can therefore be combined.

Simplify Expression

The process of performing all possible arithmetic operations within an expression to reduce it to its simplest form.

Distributive Property

A property in algebra that allows for the multiplication of a single term and two or more terms inside a set of parentheses.