shares in treasury

Examples of shares in treasury in the following topics:

• Repurchasing Stock

  • For accounting purposes, treasury shares are included in calculations to determine legal capital, but are excluded from calculations for EPS amounts.
  • In this method, the paid-in capital account is reduced in the balance sheet when the treasury stock is bought.
  • In either method, any transaction involving treasury stock cannot increase the amount of retained earnings.
  • If the treasury stock is sold for more than cost, then the paid-in capital treasury stock is the account that is increased, not retained earnings.
  • The firm then resells 7,500 shares of treasury stock for $28.

• Accounting for Sale of Stock

  • Treasury stock is issued stock that the company has bought back from its shareholders.
  • If the company plans to re issue the shares in the future, it would hold them in treasury and report the reduction in stockholder's equity on the balance sheet.
  • There are several reasons a company may purchase treasury stock, it may need it for employee compensation plans, to buy another company or to reduce the number of outstanding shares.
  • Credit additional paid in capital (the difference between sale price and purchase price)
  • Summarize how to account for the sale of common stock, preferred stock and treasury stock

• Dividends Payable

  • When a corporation earns a profit or surplus, that money can be put to two uses: it can either be re-invested in the business (called retained earnings), or it can be distributed to shareholders as dividends.
  • There are two ways to distribute cash to shareholders: share repurchases (reported as treasury stock in the owner's equity section of the balance sheet) or dividends.
  • A dividend is allocated as a fixed amount per share.
  • Therefore, a shareholder receives a dividend in proportion to the shares he owns -- for example, if shareholder Y owns 100 shares when company Z declares a dividend of USD 1.00 per share. then shareholder Y will receive a dividend of USD 100 for his shares.
  • The per share dividend amount is multiplied by the number of shares outstanding and this result is debited to retained earnings and credited to dividends payable.

• Treasury Stock

  • When a corporation has additional authorized shares of stock that are to be issued after the date of original issue, in most states the preemptive right requires offering these additional shares first to existing stockholders on a pro rata basis.
  • When the treasury stock is sold back on the open market, the treasury stock account is reduced (credited) for the original cost and the difference between original cost and sales price is debited or credited to a treasury stock paid in capital account, which is also disclosed in the equity section of the balance sheet.
  • When using the par value method, the company's reacquisition of its own stock is treated as a retirement of the shares reacquired.
  • On the purchase date, treasury stock is increased (debited) for the par value of stock reacquired and paid in capital is reduced (debited) or increased (credited) by the amount of the purchase price in excess of par.
  • Companies that issue common stock and reacquire it in the future, reclassify it as treasury stock.

• Open Market Operations

  • In practice, however, most assets cannot be traded readily enough to accommodate open market operations.
  • Treasury securities satisfies these conditions.
  • Treasury securities market is the broadest and most active of U.S. financial markets.
  • A sizable share of the Federal Reserve's holdings is held in Treasury securities with remaining maturities of one year or less.
  • Treasury securities held in the Federal Reserve's open market account, December 31, 2004

• Repurchasing Shares

  • In a share repurchase, the issuing company purchases its own publicly traded shares, thus reducing the number of shares outstanding.
  • The company then can either retire the shares, or hold them as treasury stock (non-circulating, but available for re-issuance).
  • When a company repurchases its own shares, it reduces the number of shares held by the public.
  • Repurchasing shares will lead to a corresponding increase in price of the shares still outstanding.
  • The market capitalization of the company is unchanged, meaning that a reduction in the number of shares outstanding must be accompanied by an increase in stock price.

• Issuing Stock

  • Issued shares are the sum of outstanding shares and treasury stock, or stock reacquired by the company.
  • Shares of common stock are primarily issued in the United States.
  • Both common and preferred stock issued are reported in the stockholder's equity section of the balance sheet.
  • Each share type is reported at market value at the time the shares are purchased by investors, which is also the point in time when shares become outstanding.
  • This value is divided between the stock's par, or stated value and additional paid in capital.

• The "Bond Yield Plus Risk Premium" Approach

  • The equity risk premium is essentially the return that stocks are expected to receive in excess of the risk-free interest rate.
  • In general, an equity's risk premium will be between 5% and 7%.
  • The Fed Model (forward operating earnings yield [earnings per share divided by share price] minus the 10-year U.S.
  • Treasury Bond yield)
  • The dividend yield plus projected earnings growth, minus the 10-year Treasury yield

• Delphi and Greek Treasuries

  • The theatre was first built in the fourth century BCE and renovated multiple times in the following centuries.
  • These buildings were single-room naosoi (plural of naos) fronted by two columns in antis and decorated in either the Doric or Ionic style.
  • The Siphian Treasury was the first structure built entirely from marble when it was erected in 530 BCE and was elaborately decorated.
  • The figures are carved in an Archaic style and in high relief, and they are almost, but not entirely, freed from the wall of the frieze.
  • Describe the treasuries built during the Archaic period in Delphi, with attention to both their style and function.

• Reporting Stockholders' Equity

  • Changes in the firm's assets relative to its liabilities.
  • Share repurchases, in which a firm gives back money to its investors, reducing its financial assets, and the liability of shareholders' equity.
  • Rather than giving money to all shareholders immediately in the form of a dividend payment, a share repurchase reduces the number of shares, thereby increasing the percent of future income and distributions garnered by each remaining share.
  • The market value of shares in the stock market does not correspond to the equity per share calculated in the accounting statements.
  • A prime example of dirty surplus accounting is the inclusion of unrealized gains or losses on treasury stocks, or securities they are holding for sale.