Gertrudis Corporation has $10 par value Common Stock with 1,000,000 shares authorized, and a value of $7,000,000 before purchasing 3,000 shares of common stock. The resulting number of common shares issued and outstanding is:

Question

Quizplus · Accepted Answer

The authorized shares do not matter in this situation. The value of the stock before purchasing 3,000 shares was $7,000,000, and the par value of each share is $10. Therefore, the number of shares issued before purchasing 3,000 shares can be calculated as $7,000,000 divided by $10, which is 700,000 shares. After purchasing 3,000 shares, the total number of shares outstanding would be 700,000 + 3,000, which is 703,000 shares. However, the question asks for the number of common shares issued and outstanding, which is only the number of shares outstanding because all issued shares are outstanding. Therefore, the resulting number of common shares issued and outstanding is 697,000 shares (Option B).

Gertrudis Corporation Has $10 Par Value Common Stock with 1,000,000