Question

The authorized share capital of the Alfred Cake Company is 124,000 shares. Currently 21,000 shares are issued and outstanding. The equity is currently shown in the company’s books as follows:

Common stock	$70,000
Retained earnings	31,000
Common equity	101,000

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

Number of shares that can be issued

b.	If the company issues 10,200 shares at $5.34 a share, show how this will appear in the company’s books. (Enter your answers in thousands of dollars. Round your answers to 1 decimal place.)

	Common Shares	$
	Retained Earnings	$
	Net Common Equity	$

Answer 1

a.

Number of shares can be issued without the approval of shareholders = 124,000 - 21,000

Number of shares can be issued without the approval of shareholders = 103,000

b.

If company issues 10,200 shares at $5.34 a share

Common Shares = 124,468

Retained Earning = 31,000

Common Equity = 155,468