Question

A corporation purchases 5,203 shares of its own $5 par common stock for $23 per share,...

A corporation purchases 5,203 shares of its own $5 par common stock for $23 per share, recording it at cost. What will be the effect on total stockholders' equity?

a.increase by $119,669

b.decrease by $93,654

c.decrease by $119,669

d.increase by $93,654

Texas Inc. has 4,155 shares of 4%, $100 par value cumulative preferred stock and 83,552 shares of $1 par value common stock outstanding at December 31. What is the annual dividend on the preferred stock?

a.$40.00 per share

b.$4,155 in total

c.$3,342 in total

d.$16,620 in total

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Homework Answers

Answer #1

Solution

1. The correct option is option (c) $119669.

Explanation- When the company purchases its own shares it is recorded on the amount on which it is purchased and since the company is purchasing it's own shares it will decrease the stockholders equity of the company. So there will be a decrease of $119669(5203×23).

31. The correct option is option (d) $16620.

Explanation- The annual dividend on the preferred stock will be:

Face value of preferred stocks× number of preferred stock×rate%

100×4155×4%= 16620.

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