McKean Corporation authorized 500,000 shares of common stock in its articles of incorporation. On May 1, 2019, 100,000 shares were sold to the company's founders. However, on October 15, 2019, McKean repurchased 20,000 shares to settle a dispute among the founders. At this date, how many shares were issued and outstanding, respectively?

A) 80,000 and 100,000

B) 100,000 and 80,000

C) 100,000 and 100,000

D) 500,000 and 100,000

B) 100,000 and 80, 000

Explanation:

Authorized shares is the total number of shares a corporation can issue is the maximum amount of share capital that the company is authorized by its constitutional documents to issue to shareholders. There is no obligation to issue all, but potentially all can be issued.

Issued Stock

Issued Stock is the total number of a company's shaers it has distributed to its investors and it is a part of the authorised shares.

The number of Common Stock issued is different from the common stock authorised therefore, the answer cannot be 500,000.

The number of shares issued is clearly stated " On May 1, 2019, 100,000 shares were sold to the company's founders". On that date, the record has it that 100,000 shares have been issued out of the total 500,000 authorised

Number of shares issued = 100,000

Outstanding Stock

Outstanding stock is actually the number of the issued stock - the number of bought back by a company for one reason or the other to reduce the aggregate stock in circulation. It is also called Treasury Stock. In this particular case, the reason for the re-purchase of the 20,000 shares is to settle a dispute among the founders.

Outstanding Stock = Issued Stock-Company Re-Purchased Stock / Stock held in company's treasury.

Outstanding stock = 100,000-20,000 = 80,000 units of shares