Question

The owners' equity accounts for Vidi International are shown here:      Common stock ($.50 par value)...

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

  

  Common stock ($.50 par value) $ 46,000
  Capital surplus 380,000
  Retained earnings 828,120
     Total owners’ equity $ 1,254,120

  

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.)


     

Homework Answers

Answer #1

Solution:-

Information given:

Common stock ($.5 par value) = $46,000

Capital surplus =380,000

retained earnings = 828,128

Total owners’ equity = $1,254,120

  • Number of common stock outstanding

= total common stock / par value per share

= $46,000 / $.5

= 92,000 shares outstanding

a.)

split ratio = 4/1 = 4

  • 1. number of share outstanding after the split

= Outstanding shares before split * Split ratio

= 92,000 * 4

= 368,000 shares

  • 2. new par value per share after the split

= Par value before split / split ratio

=$.5 / 4

=$.125 per share

b.)

split ratio = 1/5 = .2

  • 1. number of share outstanding after the split

= Outstanding shares before split * Split ratio

= 92,000 * .2

= 18,400 shares

  • 2. new par value per share after the split

= Par value before split / split ratio

=$.5 / .2

=$2.5 per share

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