$1.00 Financial accounting
BYP12-4 The Stockholders meeting for Harris Corporation has been in progress for some time. The chief financial officer for Harris is presently reviewing the companys financial statements and is explaining the items that comprise the stockholders equity section of the balance sheet for the current year. The stockholders equity section of Harris Corporation at December 31, 2008, is shown on page 590.
At the meeting, stockholders have raised a number of questions regarding the stockholders equity section.
If you were the chief financial officer for Harris Corporation:
(a) What does cumulative provision related to the preferred stock mean?
(b) I thought the common stock was presently selling at $29.75, but the company has the stock stated at $1 per share. How can that be?
(c) Why is the company buying back its common stock? Furthermore, the treasury stock has a debit balance because it is subtracted from stockholders equity. Why is treasury stock not reported as an asset if it has a debit balance?
(d) Why is it necessary to show additional paid-in capital? Why not just show common stock at the total amount paid in?
Balance Sheet (partial)
Paid in capital
Preferred stock, authorized 1,000,000 shares
cumulative, $100 par value, $8 per share, 6,000
shares issued and outstanding ..$600,000
Common stock, authorized 5,000,000 shares, $1 par
value, 3,000,000 shares issued, and 2,700,000
Total capital stock .. 36,000,000
Additional paid-in capital
In excess of par value-preferred stock $ 50,000
In excess of par value-common stock 25,000,000
Total additional paid- in capital . 25,050,000
Total paid- in capital . 28,650,000
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- Posted on Mar 01, 2010 at 3:56:38PM
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