Analyzing and Computing Averag

Uncategorized

Analyzing and Computing Average Issue Price and Treasury Stock Cost
Assume this is the stockholders’ equity section from the Campbell Soup Company balance sheet.

Shareholders’ Equity (millions, except per share amounts)	August 3, 2008	July 29, 2007
Preferred stock: authorized 40 shares; non issued	$ —	$ —
Capital stock, $0.0375 par value; authorized 560 shares; issued 542 shares	20	20
Additional paid-in capital	337	331
Earnings retained in the business	7,866	7,072
Capital stock in treasury, 186 shares in 2008 and 163 shares in 2007, at cost	(6,812)	(6,015)
Accumulated other comprehensive loss	(136)	(123)
Total shareholders’ equity	$ 1,275	$ 1,285

Assume Campbell Soup Company also reports the following statement of stockholders’ equity.

(Millions, except per share amounts)	Capital Stock	Additional Paid-in Capital	Earnings Retained in the Business	Accumulated Other Comprehensive Income (Loss)	Total share-owners’ Equity
Issued	In Treasury
Shares	Amount	Shares	Amount
Balance at July 29, 2007	542	$ 20	(163)	$ (6,015)	$ 331	$ 7,072	$ (123)	$ 1,285
Net earnings						1,145		1,145
Other comprehensive income (loss)							(13)	(13)
Impact on adoption of FIN 48 Note 10)						(14)		(14)
Dividends ($0.88 per share)						(337)		(337)
Treasury stock purchased			(26)	(903)				(903)
Treasury stock issued under managementincentive and stock options plan			3	106	6			112
Balance at August 3, 2008	542	$ 20	(186)	$ (6,812)	$ 337	$ 7,866	$ (136)	$ 1,275

(a) Campbell Soup Company reports $20 million in its Common Stock account. Which of the following statements best describes the manner in which this number is computed?

The computation uses the number of issued shares multiplied by the par value of the stock.

The computation uses the number of outstanding shares multiplied by the market price of the stock.

The computation uses the number of issued shares multiplied by the market value of the stock.

The computation uses the number of outstanding shares multiplied by the par value of the stock.

(b) At what average price were the Campbell Soup shares issued? (Round your answer to two decimal places.)
$Answer

(Enter any deductions as negative numbers.)

($ millions)
Retained earnings, July 29, 2007	Answer
Net earnings	Answer
Dividends	Answer
Miscellaneous	Answer
Retained earnings, August 3, 2008	Answer

(d) Campbell Soup reports an increase in stockholders’ equity relating to the exercise of stock options (titled “Treasury stock issued under management incentive and stock option plans”). This transaction involves the purchase of common stock by employees at a preset price. Which of the following statements best describes the nature of this transaction?

The exercise of employee stock options resulted in the issuance of 3 million shares of stock for a total of $112 million that was recognized as a gain on sale, thus increasing Retained Earnings.

The exercise of employee stock options resulted in the issuance of 3 million shares of stock for a total of $112 million that was recognized as a reduction of Treasury Stock and an increase in Additional Paid-In Capital.

The exercise of employee stock options resulted in the issuance of 3 million shares of stock for a total of $112 million that was recognized as an increase in the Common Stock and in the Additional Paid-In Capital.

The exercise of employee stock options resulted in the issuance of 3 million shares of stock for a total of $112 million that was recognized as an increase in the Common Stock account only.

(e) Which of the following statements best describes the transaction relating to the “Treasury stock purchased” line in the statement of stockholders’ equity?

Campbell Soup repurchased 26 million shares of common stock for a total of $903 million. This transaction had no effect on the components of Stockholders’ Equity.

Campbell Soup repurchased 26 million shares of common stock for a total of $903 million. The effect of the repurchase of stock is to recognize a loss on the repurchase, thus reducing Cash and Retained Earnings.

Campbell Soup repurchased 26 million shares of common stock for a total of $903 million. The effect of the repurchase of stock is to reduce Cash and Stockholders’ Equity.

Campbell Soup repurchased 26 million shares of common stock for a total of $903 million. The effect of this transaction is to increase Stockholders’ Equity.

(f) Campbell Soup’s stock price was $35.85 on August 1, 2008 (the closest trading day to fiscal year-end). Determine the company’s market capitalization that day.
Enter answers in millions. Round answer to the nearest million.
$Answer

million

(g) Calculate and interpret the company’s market-to-book ratio at August 1, 2008.
Round answer to two decimal places.
Answer

Continue to order Get a quote

Our guarantees

Delivering a high-quality product at a reasonable price is not enough anymore.
That’s why we have developed 5 beneficial guarantees that will make your experience with our service enjoyable, easy, and safe.

Money-back guarantee

You have to be 100% sure of the quality of your product to give a money-back guarantee. This describes us perfectly. Make sure that this guarantee is totally transparent.

Zero-plagiarism guarantee

Each paper is composed from scratch, according to your instructions. It is then checked by our plagiarism-detection software. There is no gap where plagiarism could squeeze in.

Free-revision policy

Thanks to our free revisions, there is no way for you to be unsatisfied. We will work on your paper until you are completely happy with the result.

Privacy policy

Your email is safe, as we store it according to international data protection rules. Your bank details are secure, as we use only reliable payment systems.

Fair-cooperation guarantee

By sending us your money, you buy the service we provide. Check out our terms and conditions if you prefer business talks to be laid out in official language.