Question

Luna incorporated has the following Shareholder's equity section: Common Stock, $5 PV $50,000 PIC- Excess Par...

Luna incorporated has the following Shareholder's equity section:

Common Stock, $5 PV $50,000

PIC- Excess Par Value - C/S 65,000

Retained Earnings 180,000

Less: Treasury Stock (2,000) (38,7000)

$246,300

a. The average issue price per share of common stock was $23

b. Luna has 8,000 shares of common stock outstanding

c. If Luna had a 2 for 1 stock split, the new par value would be $2.50

d. All of the above are true

e. Only (a) and (b) are true

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Homework Answers

Answer #1

a is false. The average issue price is $11.50 as can be seen from the table below.

b. is true. Luna has 8,000 shares outstanding as shown in the table below.

c. is correct.

In a 2 for 1 stock split, one share is replaced by two shares. therefore one share which has a par value of $5.00 shall be split inot two shares of $2.50 each.

Common stock A 50000
Par value per share B $5.00
Number of shares (A/B) C 10000
PIC - Excess par value D 65000
Total paid up value (A + D) E 115000
Average Issue price per share (E / C) F $11.50
Number of treasury shares G 2000
Number of shares outstanding (C - G) H 8000

Therefore we can say that only b and c are true.

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