Question

Murry’s Inc. sold $1M shares of $25 par value common stock at $32. Murry’s repurchased 100,000 shares at $50 per share and then sold 70,000 of those shares at $55

Calculate total shareholder’s equity for Murry’s Inc.

Answer 1

Total Shareholder's Equity= $30,850,000

Journal entries:

DR. Cash $32,000,000

CR. Common Shares $25,000,000

CR. Share Premium $7,000,000

(Shares sold at $32)

Computation:

1,000,000 x $32 = $32,000,000

1,000,000 x $25 = $25,000,000

$32,000,000 - $25,000,000 = $7,000,000

DR,. Treasury Shares $5,000,000

CR. Cash $5,000,000

(Shares repurchased)

Computation:

100,000 x $50 = $5,000,000

DR. Cash $3,850,000

CR. Treasury Shares $3,500,000

CR. Share Premium- TS $350,000

(Shares resold)

Computation:

70,000 x 55 = $3,850,000

70,000 x 50 = $3,500,000

$3,850,000 - $3,500,000 = $350,000

Calculation:

$25,000,000 Common Shares

$7,000,000 Share Premium- Common shares

($1,500,000) Treasury Shares

$350,000 Share Premium-Treasury shares

$30,850,000 Total Shareholder's Equity