Table of contents

1. Introduction to Accounting1h 21m
2. Transaction Analysis1h 13m
3. Accrual Accounting Concepts2h 38m
4. Merchandising Operations2h 30m
5. Inventory1h 55m
6. Internal Controls and Reporting Cash1h 16m
7. Receivables and Investments3h 8m
8. Long Lived Assets5h 1m
9. Current Liabilities2h 19m
10. Time Value of Money1h 23m
- Time Value of Money Equations
  35m
- Using Time Value of Money Tables
  47m
11. Long Term Liabilities2h 45m
12. Stockholders' Equity2h 15m
13. Statement of Cash Flows2h 24m
14. Financial Statement Analysis5h 25m
15. GAAP vs IFRS56m

12. Stockholders' Equity

Shares Authorized, Issued, and Outstanding

Financial Accounting

12. Stockholders' Equity

Shares Authorized, Issued, and Outstanding

Previous problemNext problem

Struggling with Financial Accounting?

Join thousands of students who trust us to help them ace their exams!Watch the first video

Multiple Choice

If a company has previously authorized 50,000 shares of common stock and sells 10,000 of these shares to investors, which of the following statements is correct?

The number of shares issued increases by 10,000.

The number of shares outstanding decreases by 10,000.

The number of shares authorized decreases by 10,000.

The number of shares issued remains unchanged.

Previous problemNext problem

Verified step by step guidance

Understand the key terms: 'Authorized shares' are the maximum number of shares a company is allowed to issue as approved by its corporate charter. 'Issued shares' are the shares that the company has sold to investors. 'Outstanding shares' are the shares currently held by investors, excluding any treasury shares repurchased by the company.

Analyze the scenario: The company has authorized 50,000 shares, meaning it can issue up to this amount. It sells 10,000 shares to investors, which means these shares are now considered 'issued' and 'outstanding' unless repurchased as treasury stock.

Determine the impact on issued shares: Selling 10,000 shares increases the number of issued shares by 10,000 because these shares are now distributed to investors.

Evaluate the impact on outstanding shares: Since the company sold these shares to investors, the number of outstanding shares also increases by 10,000. Outstanding shares decrease only if the company repurchases shares as treasury stock, which is not mentioned in this scenario.

Clarify the impact on authorized shares: The number of authorized shares remains unchanged at 50,000 because authorization is the maximum limit set by the corporate charter and is not affected by the issuance of shares.