Analyzing and Computing Average Issue Price and Treasury Stock Cost
Assume this is the stockholders' equity section from the Campbell Soup Company balance sheet.

Shareholders' Equity (millions, except per share amounts) August 3, 2008 July 29, 2007

Preferred stock: authorized 40 shares; non issued $ -- $ --

Capital stock, $0.0375 par value; authorized 560 shares; issued 542 shares 20 20

Additional paid-in capital 337 331

Earnings retained in the business 7,866 7,072

Capital stock in treasury, 186 shares in 2008 and 163 shares in 2007, at cost (6,812) (6,015)

Accumulated other comprehensive loss (136) (123)

Total shareholders' equity $ 1,275 $ 1,285

Assume Campbell Soup Company also reports the following statement of stockholders' equity.

(Millions, except per share amounts) Capital Stock Additional
Paid-in Capital Earnings
Retained in
the Business Accumulated
Other
Comprehensive
Income (Loss) Total
share-owners'
Equity

Issued In Treasury

Shares Amount Shares Amount

Balance at July 29, 2007 542 $ 20 (163) $ (6,015) $ 331 $ 7,072 $ (123) $ 1,285

Net earnings 1,145 1,145

Other comprehensive income (loss) (13) (13)

Impact on adoption of FIN 48 Note 10) (14) (14)

Dividends ($0.88 per share) (337) (337)

Treasury stock purchased (26) (903) (903)

Treasury stock issued under managementincentive and stock options plan 3 106 6 112

Balance at August 3, 2008 542 $ 20 (186) $ (6,812) $ 337 $ 7,866 $ (136) $ 1,275

(a) Campbell Soup Company reports $20 million in its Common Stock account. Which of the following statements best describes the manner in which this number is computed?

The computation uses the number of issued shares multiplied by the par value of the stock.

The computation uses the number of outstanding shares multiplied by the market price of the stock.

The computation uses the number of issued shares multiplied by the market value of the stock.

The computation uses the number of outstanding shares multiplied by the par value of the stock.

(b) At what average price were the Campbell Soup shares issued? (Round your answer to two decimal places.)
$Answer

(c) Reconcile the beginning and ending balances of retained earnings.

(Enter any deductions as negative numbers.)

($ millions)

Retained earnings, July 29, 2007 Answer

Net earnings Answer

Dividends Answer

Miscellaneous Answer

Retained earnings, August 3, 2008 Answer

(d) Campbell Soup reports an increase in stockholders' equity relating to the exercise of stock options (titled "Treasury stock issued under management incentive and stock option plans"). This transaction involves the purchase of common stock by employees at a preset price. Which of the following statements best describes the nature of this transaction?

The exercise of employee stock options resulted in the issuance of 3 million shares of stock for a total of $112 million that was recognized as a gain on sale, thus increasing Retained Earnings.

The exercise of employee stock options resulted in the issuance of 3 million shares of stock for a total of $112 million that was recognized as a reduction of Treasury Stock and an increase in Additional Paid-In Capital.

The exercise of employee stock options resulted in the issuance of 3 million shares of stock for a total of $112 million that was recognized as an increase in the Common Stock and in the Additional Paid-In Capital.

The exercise of employee stock options resulted in the issuance of 3 million shares of stock for a total of $112 million that was recognized as an increase in the Common Stock account only.

(e) Which of the following statements best describes the transaction relating to the "Treasury stock purchased" line in the statement of stockholders' equity?

Campbell Soup repurchased 26 million shares of common stock for a total of $903 million. This transaction had no effect on the components of Stockholders' Equity.

Campbell Soup repurchased 26 million shares of common stock for a total of $903 million. The effect of the repurchase of stock is to recognize a loss on the repurchase, thus reducing Cash and Retained Earnings.

Campbell Soup repurchased 26 million shares of common stock for a total of $903 million. The effect of the repurchase of stock is to reduce Cash and Stockholders' Equity.

Campbell Soup repurchased 26 million shares of common stock for a total of $903 million. The effect of this transaction is to increase Stockholders' Equity.

(f) Campbell Soup’s stock price was $35.85 on August 1, 2008 (the closest trading day to fiscal year-end). Determine the company’s market capitalization that day.
Enter answers in millions. Round answer to the nearest million.
$Answer

million

(g) Calculate and interpret the company’s market-to-book ratio at August 1, 2008.
Round answer to two decimal places.
Answer

Question

Analyzing and Computing Average Issue Price and Treasury Stock Cost
Assume this is the stockholders' equity section from the Campbell Soup Company balance sheet.

Shareholders' Equity (millions, except per share amounts)	August 3, 2008	July 29, 2007
Preferred stock: authorized 40 shares; non issued	$ --	$ --
Capital stock, $0.0375 par value; authorized 560 shares; issued 542 shares	20	20
Additional paid-in capital	337	331
Earnings retained in the business	7,866	7,072
Capital stock in treasury, 186 shares in 2008 and 163 shares in 2007, at cost	(6,812)	(6,015)
Accumulated other comprehensive loss	(136)	(123)
Total shareholders' equity	$ 1,275	$ 1,285

Assume Campbell Soup Company also reports the following statement of stockholders' equity.

(Millions, except per share amounts)	Capital Stock	Additional Paid-in Capital	Earnings Retained in the Business	Accumulated Other Comprehensive Income (Loss)	Total share-owners' Equity
Issued	In Treasury
Shares	Amount	Shares	Amount
Balance at July 29, 2007	542	$ 20	(163)	$ (6,015)	$ 331	$ 7,072	$ (123)	$ 1,285
Net earnings						1,145		1,145
Other comprehensive income (loss)							(13)	(13)
Impact on adoption of FIN 48 Note 10)						(14)		(14)
Dividends ($0.88 per share)						(337)		(337)
Treasury stock purchased			(26)	(903)				(903)
Treasury stock issued under managementincentive and stock options plan			3	106	6			112
Balance at August 3, 2008	542	$ 20	(186)	$ (6,812)	$ 337	$ 7,866	$ (136)	$ 1,275

(a) Campbell Soup Company reports $20 million in its Common Stock account. Which of the following statements best describes the manner in which this number is computed?

The computation uses the number of issued shares multiplied by the par value of the stock.

The computation uses the number of outstanding shares multiplied by the market price of the stock.

The computation uses the number of issued shares multiplied by the market value of the stock.

The computation uses the number of outstanding shares multiplied by the par value of the stock.

(b) At what average price were the Campbell Soup shares issued? (Round your answer to two decimal places.)
$Answer

(c) Reconcile the beginning and ending balances of retained earnings.

(Enter any deductions as negative numbers.)

($ millions)
Retained earnings, July 29, 2007	Answer
Net earnings	Answer
Dividends	Answer
Miscellaneous	Answer
Retained earnings, August 3, 2008	Answer

(d) Campbell Soup reports an increase in stockholders' equity relating to the exercise of stock options (titled "Treasury stock issued under management incentive and stock option plans"). This transaction involves the purchase of common stock by employees at a preset price. Which of the following statements best describes the nature of this transaction?

The exercise of employee stock options resulted in the issuance of 3 million shares of stock for a total of $112 million that was recognized as a gain on sale, thus increasing Retained Earnings.

The exercise of employee stock options resulted in the issuance of 3 million shares of stock for a total of $112 million that was recognized as a reduction of Treasury Stock and an increase in Additional Paid-In Capital.

The exercise of employee stock options resulted in the issuance of 3 million shares of stock for a total of $112 million that was recognized as an increase in the Common Stock and in the Additional Paid-In Capital.

The exercise of employee stock options resulted in the issuance of 3 million shares of stock for a total of $112 million that was recognized as an increase in the Common Stock account only.

(e) Which of the following statements best describes the transaction relating to the "Treasury stock purchased" line in the statement of stockholders' equity?

Campbell Soup repurchased 26 million shares of common stock for a total of $903 million. This transaction had no effect on the components of Stockholders' Equity.

Campbell Soup repurchased 26 million shares of common stock for a total of $903 million. The effect of the repurchase of stock is to recognize a loss on the repurchase, thus reducing Cash and Retained Earnings.

Campbell Soup repurchased 26 million shares of common stock for a total of $903 million. The effect of the repurchase of stock is to reduce Cash and Stockholders' Equity.

Campbell Soup repurchased 26 million shares of common stock for a total of $903 million. The effect of this transaction is to increase Stockholders' Equity.

(f) Campbell Soup’s stock price was $35.85 on August 1, 2008 (the closest trading day to fiscal year-end). Determine the company’s market capitalization that day.
Enter answers in millions. Round answer to the nearest million.
$Answer

million

(g) Calculate and interpret the company’s market-to-book ratio at August 1, 2008.
Round answer to two decimal places.
Answer

Accepted Answer

“Since you have posted a question with multiple sub-parts, we will solve first three sub-parts for…