Question

The following items were shown on the balance sheet of Martell Corporation on 12/31/2020:

Stockholders’ Equity

      Paid-In Capital

            Capital Stock:

                  Common stock, $10 par value, 1,000,000 shares authorized;  shares issued and  outstanding ..........................    $5,000,000

            Additional paid-in capital:

                  In excess of par value ............................................................................................................................................................................................................................................      2,500,000

Total paid-in capital ....................................................................................................................................................................................................................................................      7,500,000

      Retained Earnings ..............................................................................................................................................................................................................................................................         500,000

                  Total paid-in capital and retained earnings ..................................................................................................................................................................................................      8,000,000

      Less: Treasury stock (50,000 shares) ........................................................................................................................................................................................................................     1,000,000

                  Total stockholders’ equity .................................................................................................................................................................................................................................    $7,000,000

In addition to the blanks above, complete the following statements:

• The total sales price (cash received) for the common stock when issued was $  .
• How much did the treasury stock cost per share (use 2 decimal points)? $
• What was the average issue price of the common stock (use 2 decimal points)? $

Answer 1

Required 1:

Total sales price for the common stock = Paid in capital + Additional paid-in capital / Number of shares issued.

= 5,000,000 + 2,500,000 / (5,000,000 / 10)

= 7,500,000 / 500,000

Total sales price (cash received) for the common stock when issued = $15.

Required 2:

Treasury stock cost per share = 1,000,000 / 50,000

Treasury stock cost per share = $20.

Required 3:

Average issue price of the common stock = Paid in capital + Additional paid-in capital / Number of shares issued.

= 5,000,000 + 2,500,000 / (5,000,000 / 10)

= 7,500,000 / 500,000

Average issue price of the common stock = $15.