question archive Nest Co

Nest Co

Subject:AccountingPrice:2.84 Bought3

Nest Co. issued 100,000 shares of common stock (i.e., ordinary shares). Of these, 5,000 were held as treasury stock at December 31, 20x1. During 20x2, transactions involving Nest's common stock were as follows: May 3 - 1,000 shares of treasury stock were sold. August 6 - 10,000 shares of previously unissued stock were sold. November 18 - a 2-for-1 stock split took effect. Laws in Nest's state of incorporation protect treasury stock from dilution. At December 31, 20x2, how many shares of Nest's common stock were issued and outstanding? Shares Issued - Outstanding

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Ans Given            
  On December 31, 20x1            
  Shares Issued 100000          
  Less: Treasury stock -5000          
  Shares Outstanding 95000          
               
  Since further transactions related to common stock is occurred during the year, its status further changes as follows:
 
      Year 20x2    
    Beginning May 3 Aug 6 Nov 18 Dec 31  
  Shares Issued 100000 100000 110000 220000 220000  
  Less: Treasury stock -5000 -4000 -4000 -8000 -8000  
  Shares Outstanding 95000 96000 106000 212000 212000  
               
Note: On August 6, previously unissued shares are issued , so shares issued increased to 110000 from 100000 (100000+10000)
               
Note: 2 since state laws protect treasury shares from dilution, so unissued treasury shares also splitted in to 2 for 1 (4000 x 2 = 8000)
               
Note: 3 Stock split increases the no of shares issued and outstanding to doubles.  
  110000 x 2 = 220000            
  -4000 x 2 = -8000            
  220000-8000 = 212000            
Note: 4 status of Nov 18 continues on Dec 31, 20x2        
               
Ans Shares Issued 220000          
  Shares Outstanding 212000          
               

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