Accounting (X Posted to Finance)

[nebben]

I figure lots of students in BBV, maybe someone can help me.

Mods- If this is not Ok, please delete. If deleted, I will make amends to BBV4Life with the proper amount of NSFW pics.
Anyone who helps me, IM me at nebben2k2 on AIM, and I will give you a reward. You will like it.

In my accounting class, we are learning about stock options.
Basically, we have been taught that there is a contra account in shareholders equity called Treasury stock, and that it has a debit side balance. When stock options are excercised, the employees excercising them pay cash for the agreed upon price, the treasury account is credited for the value the firm paid for the shares, and capital in excess is debited for the difference between the two prices multiplied by the number of shares being optioned.

So, if a company bought 20,000 shares at $4, and gave 2,000 of them away as options for $2 (assuming the options were excercised at once), the journal entry would look like this:

Debits: Cash (2,000*2)= 4,000
Capital in Excess= 4,000
Credits: Treasury stock (4*2,000)= 8,000

Thus, the entry balances. The part I am confused about is that the book says:
"If the book value (shareholder's equity- preferred stock) is anything greater than $2 per share before the transaction, the book value per share of the company's stock after the transaction will be reduced."


Can somebody offer any insight? This is not a homework question, its a statement in my textbook. I have an exam tommorow, and obviously one statement isn't going to make or break me, but I'm concerned that this indicates some flaws in my understanding. Any help is greatly appreciated.

[crzylgs]

Definitely the first BBV4L post xposted to finance.

ps tl;dr

[bigt2k4]

"If deleted, I will make amends to BBV4Life with the proper amount of NSFW pics."

Mods please delete

[DannyOcean_]

IM sent

[majesty2009]

Im in accounting class right now ignoring my professor and I gotta read this [censored] in BBV4Life WTF

[NajdorfDefense]

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Any help is greatly appreciated.

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All semester - teacher, tutors, fellow students, etc.

stop cheating on your take home exam, kthxby.

[nebben]

Like I said dick, it's from my textbook. It's unfortunate that you have nothing better to do at midnight on a Wednesday than to roll around BBV looking for someone to internet flame. Fortunately for me, I attend a university where we don't get take home accounting finals. I have an exam for that tommorow. So please, get a [censored] life. kthxby.

[acidca]

[ QUOTE ]
Like I said dick, it's from my textbook. It's unfortunate that you have nothing better to do at midnight on a Wednesday than to roll around BBV looking for someone to internet flame. Fortunately for me, I attend a university where we don't get take home accounting finals. I have an exam for that tommorow. So please, get a [censored] life. kthxby.

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bbv4life. it's a replacement

[Retribution1824]

[ QUOTE ]
[ QUOTE ]
Like I said dick, it's from my textbook. It's unfortunate that you have nothing better to do at midnight on a Wednesday than to roll around BBV looking for someone to internet flame. Fortunately for me, I attend a university where we don't get take home accounting finals. I have an exam for that tommorow. So please, get a [censored] life. kthxby.

[/ QUOTE ]

bbv4life. it's a replacement

[/ QUOTE ]

nh gg

also, isnt the answer 69?

[AbreuTime]

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"If the book value (shareholder's equity- preferred stock) is anything greater than $2 per share before the transaction, the book value per share of the company's stock after the transaction will be reduced."

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YES THAT IS CORRECT, BECAUSE THE BOOK VALUE DIVIDED BY THE NUMBER OF SHARES EQUALS BOOK VALUE PER SHARE. MORE SHARES EQUALS LESS VALUE PER SHARE. TEH COMPANY BE LOOOSING VALUE IF THEY GIVE AWAY OPTIONS AT LESS THAN BOOK VALUE. THE ANSWERS TO YOUR QUESTIONS ARE IN THE TEXTBOOK. I HOPE THIS HALPS. DISCLAIMER: I KNOW NOTHING ABOUT WHAT I JUST SAID, AND YOU SHOULD CONSULT OTHER PROFESSIONAL STUDENTS FOR ANSWERS TO YOUR QUERIES.