Question

S17-03 Stock Splits [LO3]

The owners’ equity accounts for Vidi International are shown here

Common stock ($.50 par value)	$	25,000
Capital surplus		215,000
Retained earnings		642,700
Total owners’ equity	$	882,700

a-1.	If the company declares a four-for-one stock split, how many shares are outstanding now? (Do not round intermediate calculations.)

a-2.	What is the new par value per share? (Do not round intermediate calculations and round your answer to 3 decimal places, e.g., 32.161.)

b-1.	If the company declares a one-for-five reverse stock split, how many shares are outstanding now? (Do not round intermediate calculations.)

b-2.	What is the new par value per share? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)

     

Answer 1

a-1. The number of shares outstanding now

The number of shares outstanding now = [$25,000 / $0.50] x [4/1]

= 50,000 Shares x [4/1]

= 200,000 Shares

a-2. The new par value per share

The new par value per share = $0.50 per share / [4/1]

= $0.125 per share

b-1. The number of shares outstanding now

The number of shares outstanding now = [$25,000 / $0.50] x [1/5]

= 50,000 Shares x [1/5]

= 10,000 Shares

b-2. The new par value per share

The new par value per share = $0.50 per share / [1/5]

= $2.50 per share