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.)

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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