Flavor Corporation
Partial balance sheet as at December 31, 2009
($ millions)
Stockholders' equity:
Common stock, $1.00 par, 80,000,000 shares
authorized, 27,900,000 issued $ 27.90
Additional paid-in capital 334.80
Retained earnings 645.26
Treasury shares, at cost (520,000 shares) (15.08)
Total stockholders' equity $992.88
History:
a. Flavor Corporation issued 13,950,000, $2.00 par common shares in its initial public offer (IPO) on July 6, 2003.
b. Flavor Corporation had a 2-for-1 stock split on September 20, 2007. The share price was $42 immediately prior to the split.
c. Flavor Corporation acquired the treasury stock in a single open market transaction on August 15, 2008.
Required:
a. At what price did Flavor Corporation issue the shares in its IPO?
b. What was the approximate price of Flavor Corporation's common stock immediately following the stock split on September 20, 2007?
c. What was the price of Flavor Corporation's common stock on August 15, 2008?
Prepare journal entries for the following transactions that occurred in 2010:
d. On May 15, 2010 Flavor Corporation issued 4,100,000 new shares for $37.00.
e. On October 16, 2010 Flavor Corporation declared a 3-for-2 stock split to be distributed on November 4, 2010 to shareholders of record on October 29, 2010. The share price of Flavor Corporation's common stock on October 16, 2010 was $39.00. (NOTE: The shares in treasury are also split and the per share cost adjusted accordingly, there is no change to the account balance).
f. On November 22, 2010 Flavor Corporation repurchased 600,000 of its common stock in an open market purchase. The price paid was $29 per share.
g. On December 3, 2010 Flavor Corporation declared a cash dividend of $0.20 per share payable on January 18, 2011 to shareholders of record on January 5, 2011.
Prepare the year-end stockholders' equity section of the balance sheet:
h. Complete the Stockholders' equity section of Flavor Corporation's Balance Sheet as at December 31, 2010. Flavor Corporation reported a net income of $31,360,000 for 2010. Include all appropriate share numbers. (Hint: Total stockholders' equity is $1,149,216,000 or in millions = $1,149.2).