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A firm has the following balance sheet: Assets Liabilities and Equity Cash $ 5,000 Accounts payable...

A firm has the following balance sheet:

Assets Liabilities and Equity
Cash $ 5,000 Accounts payable $ 5,000
Accounts receivable 153,000 Long-term debt 109,000
Inventory 89,000 Common stock ($8 par; 32,000
4,000 shares outstanding)
Plant and equipment 190,000 Additional paid-in capital 148,000
Retained earnings 143,000
$437,000 $437,000

  1. Construct a new balance sheet showing the impact of a four-for-one split. If the current market price of the stock is $55, what is the price after the split? Round the par value and the market price after the split to the nearest cent, the number of shares outstanding to the nearest whole number, and the other answers to the nearest dollar.

    Assets Liabilities and Equity
    Cash $ Accounts payable $
    Accounts receivable $   Long-term debt $  
    Inventory $   Common stock ($   par; $  
    shares outstanding)
    Plant and equipment $   Additional paid-in capital $  
    Retained earnings $  
    $   $  

    Price of the common stock after the split: $ _____________

  2. Construct a new balance sheet showing the impact of a 15 percent stock dividend. After the stock dividend, what is the new price of the common stock? Use the original balance sheet from the problem statement. Round the par value and the market price after the stock dividend to the nearest cent, the number of shares outstanding to the nearest whole number, and the other answers to the nearest dollar.

    Assets Liabilities and Equity
    Cash $ Accounts payable $   
    Accounts receivable $   Long-term debt $  
    Inventory $   Common stock ($   par; $  
    shares outstanding)
    Plant and equipment $   Additional paid-in capital $  
    Retained earnings $  
    $   $  

    Price of the common stock after the stock dividend: $___________  

Solutions

Expert Solution

The impact of stock split and stock dividend on balance sheet is shown below

jeff jeffy answered 2 years ago
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