Question: Your friend, Jonathon Fain, is an engineering major with an entrepreneurial spirit. He wants to start his own corporation and needs your accounting expertise. He has no idea what the following terms mean:

(1) authorized stock,

(2) issued stock,

(3) outstanding stock,

(4) preferred stock, and

(5) treasury stock. Required:

Write a note to Jonathon carefully explaining what each term means and how they are different from each other.