Exercise 3 ABC Ltd, a producer of medical pumps, has the following stockholders' equity account on December 31:

We are given, Common stock—$0.80 par value, Authorized 35,000,000 shares = 0.80 * 35,000,000 Issued capital 15,000,000 shares * 0.80 = $ 12,00,000 Treasury stock 1000,000 shares Authorized capital is the part of the capital that a company can maximum raise. Whereas issued capital is part of authorized capital which is currently being issued out of it. It is always equivalent to or less than authorized capital. Treasury stocks are those shares that are bought back by the company through the open market. There are 20 million shares that a company can issue without taking approval from the shareholder. In addition to this company can also issue 1 million shares which are part of the treasury without taking approval from the shareholder. So Total shares that can be issued = Authorized shares + Treasury shares – issued shares = 35 M + 1 M – 15 M = 21 million.

Exercise 3

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