Question

The authorized share capital of the Alfred Cake Company is 100,000 shares. The equity is currently shown in the company's books as follows: Common stock ($1 par value) 60,000 Additional paid-in capital 10,000 Retained earnings 30,000 Common equity 100,000 Treasury stock (2,000 shares) 5,000 Net common equity 95,000

Answer 1

The authorized share capital of Alfred Cake Company is 100,000 shares. The current equity structure includes Common Stock ($1 par value) of 60,000 shares, Additional Paid-in Capital of 10,000, Retained Earnings of 30,000, and Treasury Stock of 2,000 shares valued at 5,000, resulting in a net common equity of 95,000.

Explanation:

The equity structure of Alfred Cake Company reflects its financial position and ownership. The Common Stock, with a par value of $1, represents the initial investment made by shareholders, totaling 60,000 shares.

The Additional Paid-in Capital of 10,000 signifies the amount received from investors above the par value of the stock. Retained Earnings, at 30,000, encompasses the accumulated profits kept within the company after dividends have been distributed.

However, the presence of Treasury Stock, comprising 2,000 shares valued at 5,000, indicates shares repurchased by the company, reducing the number of outstanding shares. Net Common Equity is calculated by subtracting the Treasury Stock from the total equity, resulting in a value of 95,000.

This represents the remaining value attributable to common shareholders after deducting the treasury shares.

Understanding the equity structure is crucial for assessing a company's financial health and ownership distribution. It signifies the sources of funds, the allocation of profits, and the impact of treasury stock on overall shareholder equity.

In this scenario, Alfred Cake Company's equity structure illustrates the mix of capital sources and the retained earnings, shaping its net common equity value.

Complete Question:Calculate the total number of outstanding shares of Alfred Cake Company considering the current equity structure shown in the books: Common stock ($1 par value) of 60,000 shares, Additional paid-in capital of $10,000, Retained earnings at $30,000, Common equity totaling $100,000, Treasury stock comprising 2,000 shares valued at $5,000, resulting in a net common equity of $95,000.

Answer 2

The authorized share capital of Alfred Cake Company is 100,000 shares. The current equity structure includes Common Stock ($1 par value) of 60,000 shares, Additional Paid-in Capital of 10,000, Retained Earnings of 30,000, and Treasury Stock of 2,000 shares valued at 5,000, resulting in a net common equity of 95,000.

Step-by-step explanation:

The equity structure of Alfred Cake Company reflects its financial position and ownership. The Common Stock, with a par value of $1, represents the initial investment made by shareholders, totaling 60,000 shares. The Additional Paid-in Capital of 10,000 signifies the amount received from investors above the par value of the stock. Retained Earnings, at 30,000, encompasses the accumulated profits kept within the company after dividends have been distributed.

However, the presence of Treasury Stock, comprising 2,000 shares valued at 5,000, indicates shares repurchased by the company, reducing the number of outstanding shares. Net Common Equity is calculated by subtracting the Treasury Stock from the total equity, resulting in a value of 95,000. This represents the remaining value attributable to common shareholders after deducting the treasury shares.

Understanding the equity structure is crucial for assessing a company's financial health and ownership distribution. It signifies the sources of funds, the allocation of profits, and the impact of treasury stock on overall shareholder equity. In this scenario, Alfred Cake Company's equity structure illustrates the mix of capital sources and the retained earnings, shaping its net common equity value.

Complete Question:

Calculate the total number of outstanding shares of Alfred Cake Company considering the current equity structure shown in the books: Common stock ($1 par value) of 60,000 shares, Additional paid-in capital of $10,000, Retained earnings at $30,000, Common equity totaling $100,000, Treasury stock comprising 2,000 shares valued at $5,000, resulting in a net common equity of $95,000.