Question

Growth​ Industries' current​ stockholders' equity account is as​ follows:

a.  Indicate the change in par value and the number of shares outstanding if the firm declares a ​2-for-1 stock split.

b.  Indicate the​ change, in par value and the number of shares outstanding if the firm declares a 1-for-1​½

reverse stock split.  

c.  Indicate the change in par value and the number of shares outstanding if the firm declares a ​3-for-1 stock split.

d.  Indicate the change in par value and the number of shares outstanding if the firm declares a ​6-for-1 stock split.  

e.  Indicate the change in par value and the number of shares outstanding if the firm declares a ​1-for-4 reverse stock split.

a.  The number of shares outstanding after a ​2-for-1 stock split is ____

shares. ​(Round to the nearest whole​ number.)

Preferred stock	​$ ​ 400,000
Common stock ​(300 comma 000300,000 shares at ​$44 ​par)	1 comma 200 comma 0001,200,000
​Paid-in capital in excess of par	​200,000
Retained earnings	Modifying 800 comma 000 with underline    800,000
Total​ stockholders' equity	Modifying $ 2 comma 600 comma 000 with double underline$2,600,000

Answer 1

Answer to Part a.

Number of Common Stock Outstanding = 300,000 Shares
Par Value per Share = $4
Stock Split Ratio = 2 for 1

Par Value after Stock Split = $4/ 2 * 1
Par Value after Stock Split = $2

No. of Shares outstanding after Stock Split = 300,000 * 2
No. of Shares outstanding after Stock Split = 600,000 Shares

Answer to Part b.

Number of Common Stock Outstanding = 300,000 Shares
Par Value per Share = $4
Stock Split Ratio = 1 for 1 ½

Par Value after Stock Split = $4 * 1.50
Par Value after Stock Split = $6

No. of Shares outstanding after Stock Split = 300,000 / 1.50
No. of Shares outstanding after Stock Split = 200,000 Shares

Answer to Part c.

Number of Common Stock Outstanding = 300,000 Shares
Par Value per Share = $4
Stock Split Ratio = 3 for 1

Par Value after Stock Split = $4/ 3 * 1
Par Value after Stock Split = $1.33

No. of Shares outstanding after Stock Split = 300,000 * 3
No. of Shares outstanding after Stock Split = 900,000 Shares

Answer to Part d.

Number of Common Stock Outstanding = 300,000 Shares
Par Value per Share = $4
Stock Split Ratio = 6 for 1

Par Value after Stock Split = $4/ 6 * 1
Par Value after Stock Split = $0.67

No. of Shares outstanding after Stock Split = 300,000 * 6
No. of Shares outstanding after Stock Split = 1,800,000 Shares

Answer to Part e.

Number of Common Stock Outstanding = 300,000 Shares
Par Value per Share = $4
Stock Split Ratio = 1 for 4

Par Value after Stock Split = $4* 4
Par Value after Stock Split = $16

No. of Shares outstanding after Stock Split = 300,000 / 4
No. of Shares outstanding after Stock Split = 75,000 Shares