Question

Hunt Enterprises has decided to raise money bu issuing common stock. The following transactions took place when the company started business on January 1, 2020:

1. Issued 1,000 shares of stock at $50.00 per share

2. The company bought back 100 shares of stock at $60.00 per share

3. The company declared and paid a dividend of $2.00 per share

4. The company recorded a net income of $500,000 for the year

Questions

How much money was raised when the stock was issued?

What is the total amount paid for the treasury stock?

What was the total amount of the dividend paid?

At the end of the year, what is the total amount of stockholders' equity?

At the end of the year, how many shares are outstanding?

Answer 1

1.

Money raised by issuing stock = Number of shares issued x Issue price of 1 share

= 1,000 x 50

= $50,000

2.

Total amount paid for treasury stock = Number of shares bought back x Price per share

= 100 x 60

= $6,000

3.

Total dividend paid = Number of shares outstanding x Dividend per share

= 900 x 2

= $1,800

4.

Stockholder Equity Section
Common stock, paid in capital	50,000
Retained earnings	498,200
	548,200
Treasury stock	-6,000
Total stockholders equity	$542,200

Retained earnings = Net income - Dividends

= 500,000-1,800

= $498,200

5.

Number of shares outstanding = Number of shares issued - Number of shares repurchased

= 1000-100

= 900