What is the balance sheet impact of Crocs’ repurchase of its own shares of stock?

At the end of December 2013, Crocs Inc. announced that Blackstone Group is investing $200 million into the footwear company in the form of a preferred stock purchase.

Crocs plans to use the $200 million plus another $150 million of cash it already has on hand to repurchase its own common shares during the first quarter of 2014.

Assume that a share of Crocs common stock in the first quarter of 2014 has an average market price of $16.54.  Crocs common stock has a par value of $0.001 per share.

Questions

1. How many common stock shares will Crocs be able to repurchase in the first quarter of 2014 with the $200 million invested by Blackstone Group?
2. For the sake of this exercise, assume that all of the shares are repurchased on February 1, 2014.  Write the journal entry to recognize this repurchase.
3. What is the impact of this common stock repurchase on Crocs’ assets, liabilities, and stockholders’ equity?

Instructor Resources

These resources are provided to give the instructor flexibility for use of Accounting in the Headlines articles in the classroom. The blog posting itself can be assigned via a link to this site OR by distributing the student handout below. Alternatively, the PowerPoint file below contains a bullet point overview of the article and the discussion questions. The YouTube video link below is a narration of the blog post article (no discussion questions are included in the YouTube video; those can be assigned separately.)

• Student handout (pdf) (contains entire blog posting + discussion questions)
• PowerPoint file (brief article overview + discussion questions)
• YouTube video (narrated article in shareable YouTube link)

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