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The balance sheet caption for common stock is: Common stock, $10 par value, 7,000,000 shares authorized, 5,700,000 shares issued, 5,500,000 shares outstanding. (a.) Calculate the dollar amount that will be presented opposite of this caption. (b.) Calculate the total amount of a cash dividend of $1.00 per share. (c.) What accounts for the difference between issued shares and outstanding shares?
Expert Answer
a.) Balance sheet amount = shares issued * par value =5,700,000 x $10 = $57,000,000
(b.) Cash dividends are paid on outstanding shares = .5,500,000 x $1 = $5,500,000
(c.) difference between issued shares and outstanding shares is due to the treasury stock purchased by the company i.e. Issued shares – Treasury stock = Outstanding shares.
