What are the different bases for stock valuation when assets other than cash are received for issued shares of stock?
Stock valuation is an important factor to consider while making stock trading decisions. Using this strategy, the company can learn about the worth of stocks traded in the market.
The process of determining a stock's current (or expected) worth at a specific point in time is known as stock valuation. Absolute and relative valuations are used for valuing equities.
When stock is issued in exchange for services or property other than cash, the property or services should be recorded at their fair value or the fair value of the shares issued, whichever is more easily determinable.
If neither is easily determined, the board of directors usually decides on the value to be assigned.
Ravonette Corporation issued 300 shares of $10 par value common stock and 100 shares of $50 par value preferred stock for a lump sum of $13,500. The common stock has a market price of $20 per share, and the preferred stock has a market price of $90 per share. Prepare the journal entry to record the issuance.
Before Gordon Corporation engages in the treasury stock transactions listed on the next page, its general ledger reflects, among others, the following account balances (par value of its stock is $30 per share).
Paid-in Capital in Excess of Par Common Stock Retained Earnings
$99,000 $270,000 $80,000
Record the treasury stock transactions (given below) under the cost method of handling treasury stock; use the FIFO method for purchase-sale purposes.
(a) Bought 380 shares of treasury stock at $40 per share.
(b) Bought 300 shares of treasury stock at $45 per share.
(c) Sold 350 shares of treasury stock at $42 per share.
(d) Sold 110 shares of treasury stock at $38 per share.
The following note related to stockholders’ equity was reported in Wiebold, Inc.’s annual report.
On February 1, the Board of Directors declared a 3-for-2 stock split, distributed on February 22 to shareholders of record on February 10. Accordingly, all numbers of common shares, except unissued shares and treasury shares, and all per share data have been restated to reflect this stock split.
On the basis of amounts declared and paid, the annualized quarterly dividends per share were $0.80 in the current year and $0.75 in the prior year.
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