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) $ 35,000
  Capital surplus 320,000
  Retained earnings 708,120
     Total owners’ equity $ 1,063,120

If the company declares a five-for-one stock split, how many shares are outstanding now?
What is the new par value per share?
If the company declares a one-for-seven reverse stock split, how many shares are outstanding now?

What is the new par value per share?

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Answer #1
Number of shares outstanding = 35000/0.5 =70,000 shares
If the company declares a five-for-one stock split, New shares are outstanding :
New shares outstanding = 70,000*(5 / 1) = 350,000 shares
New par value = $0.5(1 / 5) = $0.10 per share.
If the company declares a one-for-seven reverse stock split, New shares are outstanding:
New shares outstanding = 70,000*(1 / 7) = 10,000 shares
New par value = $0.5(7 / 1) = $3.50 per share.
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