The authorized share capital of the Alfred Cake Company is 120,000 shares. The equity is currently shown in the company’s books as follows:

Common stock ($2 par value)	$ 69,000
Additional paid-in capital	19,000
Retained earnings	39,000
Common equity	$ 127,000
Treasury stock (4,000 shares)	13,000
Net common equity	$ 114,000
How many shares are issued?
How many shares are outstanding?
How many more shares can be issued without the approval of shareholders?

### To find the required values, let's break down the information step by step:

1. **How many shares are issued?**

   - **Common stock ($2 par value)** is reported as $69,000.
   - The par value of each share is **$2**.
   
   The number of shares issued can be calculated as:
   \[
   \text{Shares issued} = \frac{\text{Common stock}}{\text{Par value}} = \frac{69,000}{2} = 34,500 \text{ shares}
   \]

2. **How many shares are outstanding?**

   - **Treasury stock** is 4,000 shares. Treasury shares are shares that have been issued but are no longer outstanding because the company has repurchased them.
   
   The number of outstanding shares is:
   \[
   \text{Shares outstanding} = \text{Shares issued} - \text{Treasury shares} = 34,500 - 4,000 = 30,500 \text{ shares}
   \]

3. **How many more shares can be issued without the approval of shareholders?**

   - The **authorized share capital** is 120,000 shares.
   - The company has already issued 34,500 shares.

   The number of shares that can be issued without shareholder approval is:
   \[
   \text{Shares available for issue} = \text{Authorized shares} - \text{Shares issued} = 120,000 - 34,500 = 85,500 \text{ shares}
   \]

### Summary:
- **Shares issued**: 34,500 shares
- **Shares outstanding**: 30,500 shares
- **Shares that can be issued without shareholder approval**: 85,500 shares

Would you like further clarification on any part of this solution?

Here are some related questions to expand on this topic:
1. What is the difference between common stock and treasury stock?
2. How does issuing additional shares affect a company’s equity?
3. What is the significance of par value in share capital?
4. How does retained earnings relate to the overall equity of a company?
5. What are the potential implications of repurchasing shares for a company?

**Tip**: Issuing new shares dilutes existing ownership, so companies need to consider the balance between raising capital and shareholder interest.

Learn how to calculate the number of shares issued, outstanding shares, and the number of additional shares that can be issued by Alfred Cake Company. This corporate finance problem involves basic arithmetic and shares calculations, suitable for Grades 11-12 or college-level students.

Math Problem Statement

Solution

Ask a new question for Free

By Image

Math Problem Analysis

Mathematical Concepts

Formulas

Theorems

Suitable Grade Level

Related Recommendation