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Explain why treasury stock is not classified as an asset

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Reference no: EM13495208

Exercise 1

Intel Inc. is the pioneer in the manufacture of microprocessor for computers. The company's fiscal year runs from April 1 to March 31. On 4/1/2013, Intel Issued $5,000,000 of 11% Bonds due in 10 years. The interest is payable annually on April 1. The market rate of interest on that date for bonds of similar risk is 10%

  1. Prepare the journal entry for the issuance of the bonds and on the first interest payment date.
  2. Use the attached spreadsheet to prepare an amortization schedule for the bonds.

Exercise 2

Presented below is the stockholders equity section of AMR Corporation.

All amounts are in million except for number of shares and par value

Stockholders' Equity (Deficit) Current
Year		 Prior
Year
Preferred stock-20,000,000 shares authorized; none issued $ -0- $ -0-
Common stock-$1 par value; 750,000,000 shares authorized; 182,350,259 shares issued 182 182
Additional paid-in capital 2,521 2,605
Treasury shares at cost: current year-21,194,312; prior year-22,768,027 (1,308) (1,405)
Accumulated other comprehensive loss (664) (785)
Accumulated deficit (1,312) (551)

$ (581) $ 46
  1. Explain why the common stock is classified as part of the stockholder's equity.
  2. Explain why treasury stock is not classified as an asset.
  3. Explain what is meant by "Accumulated other comprehensive loss."
  4. Why is the accumulated deficit larger in the current year than in the prior year?
  5. Compute book value per share for AMR for the current year.

Reference no: EM13495208

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