Case ID: 4203
Solution ID: 12178
Words: 1071
Price $ 75

Jimmy Fu and Moog Inc Understanding Shareholders Equity

Case Solution

In the first transaction, the stock split will have no effect on the total shareholder equity, but it will increase the number of shares outstanding by 50%. The increase in the outstanding shares is shown in the spreadsheet calculations. If Jimmy was holding any stock before the split, his share holding would also increase in accordance with the split. However, the value of his holdings would remain the same as the market price of the stock would adjust in conformity with the stock split. The options would also adjust after the split, and their value would remain the same. The second transaction would reduce the number of Class A shares outstanding by 112,119. The balance of the treasury stock would also increase by the amount paid for the shares. Since the treasury account is a contra-equity account, the amount paid for the share purchase would result in a reduction in total shareholders equity. 

Excel Calculations

 Balance Sheet Extracts

Common Stock

Class A

Class B

Additional Paid-in Capital

Retained Earnings

Treasury Shares (Class A)

Treasury Shares (Class B

Accumulated Other Income

Total Share holder's Equity

Outstanding Class A Shares

Outstanding Class B Shares

Questions Covered