Situation Russell International, a publicly traded company, reacquired 500,000 shares of its common stock during July 2008
Question:
The shares that were reacquired had been owned by a group of minority shareholders who had been dissatisfied with Russell International’s earnings trend, stock price, and dividends paid. In fact, these minority shareholders had been so disgruntled that they had filed a suit against Russell’s directors during 2007. The minority shareholders’ suit claimed damages of $3 million because of the board’s failure to fulfill its fiduciary responsibility to maximize shareholders’ value.
In August 2008 the minority shareholders’ suit was dropped, with neither Russell International nor its directors having to offer or pay a settlement. Russell International accounts for its treasury stock transactions using the cost method.
Directions
Research the related generally accepted accounting principles and explain how Russell International should account for the treasury stock transaction. Cite your reference and applicable paragraph numbers.
Common Stock
Common stock is an equity component that represents the worth of stock owned by the shareholders of the company. The common stock represents the par value of the shares outstanding at a balance sheet date. Public companies can trade their stocks on...
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Related Book For
Intermediate Accounting
ISBN: 978-0324300987
10th Edition
Authors: Loren A Nikolai, D. Bazley and Jefferson P. Jones
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