[Anonymous]

Hi all,

First post but definitely not the first time visiting.

Have a question about protected Treasury Stock.

Outstanding=Issued-Treasury.

100 OS =105 issued – 5 treasury

Issue 10 previously unissued shares

110 OS =115 issued – 5 treasury

Sell 1 Treasury Stock

111=115-4

Now my question: TS is protected from dillution. 2 for 1 stock split occurs.

222=230-(4 or 8 shares?)

I would think that outstanding shares is an independent function during a stock split. It is out of your hands and when it splits, whoever owns them will have shares x2. Issued, I would also assume is a fixed thing. You issued x amount of shares, in this case 115 pre-split shares and 130 post split shares. It is a fact, nothing you can do.

So…….when treasury stock is protected from dilution, what does it do? the only way I can see to make this equation work is for you to double the number of treasury shares to make the numbers balance and half the par value. Then what does protecting the shares from dilution do? I always thought that meant that this meant

222=226-4 but this goes against the whole concept of issued shares being a stand alone value.

Also, this has just been bugging me and I doubt it will appear in the exam but how do you allocate cash dividends between common and preferred stock if common stock is true no par stock (no stated value, no par value)? Nothing I can find seems to address that potential issue and I’m rather curious as to how they would approach it.