Question

The owners' equity accounts for Vidi International are shown here:   Common stock ($.60 par value) $...

The owners' equity accounts for Vidi International are shown here:
  Common stock ($.60 par value) $ 45,000
  Capital surplus 365,000
  Retained earnings 798,120
     Total owners’ equity $ 1,208,120

  

a-1.

If the company declares a three-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.)


     

a-1. New shares outstanding
a-2. New par value $    per share
b-1. New shares outstanding
b-2. New par value $ per share

Homework Answers

Answer #1

Number of shares outstanding before stock split = Common stock / Par value per share
Number of shares outstanding before stock split = $45,000 / $0.60
Number of shares outstanding before stock split = 75,000

Answer a.

The company declares a 3-for-1 stock split.

New shares outstanding = 75,000 * 3
New shares outstanding = 225,000

New par value per share = $0.60 * (1/3)
New par value per share = $0.20

Answer b.

The company declares a 1-for-4 reverse stock split.

New shares outstanding = 75,000 * (1/4)
New shares outstanding = 18,750

New par value per share = $0.60 * (4/1)
New par value per share = $2.40

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