Question

The owners' equity accounts for Vidi International are shown here:

  

Common stock ($.50 par value)	$	42,500
Capital surplus		345,000
Retained earnings		758,120
Total owners’ equity	$	1,145,620

  

a-1.	If the company declares a two-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-four 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

Shares outstanding before stock split = Common stock / Par value = 42500 / 0.50	85000
a-1
Shares outstanding after stock split = Shares outstanding before stock split * Stock split ratio = 85000 * (2/1)	170000
a-2
New par value per share = Old par value per share / Stock split ratio = 0.50 / ( 2/1 )	0.25
b-1
Shares outstanding after stock split = Shares outstanding before stock split * Stock split ratio = 85000 * (1/4)	21250
b-2
New par value per share = Old par value per share / Stock split ratio = 0.50 / ( 1/4 )	2