Question

The owners’ equity accounts for Hexagon International are shown here:

  

Common stock ($.40 par value)	$	32,500
Capital surplus		315,000
Retained earnings		698,120
Total owners’ equity	$	1,045,620

  

a-1.	The company declares a four-for-one stock split. How many shares are outstanding now? (Do not round intermediate calculations.)

New shares outstanding

  

a-2.	The company declares a four-for-one stock split. 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.)

  

New par value

$ per share

  

b-1.	The company declares a one-for-five reverse stock split. How many shares are outstanding now? (Do not round intermediate calculations.)

    

New shares outstanding

  

b-2.	The company declares a one-for-five reverse stock split. 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.)

  

New par value

$ per share

Answer 1

	Stock Split : It means the split the par value of thecommon stock , so in this cash the nunmber of
	shares will increase but total par value of the shares are same.
	Reverse stock split : it means the combine the par value of the common shares in the described ratio.
	in this case the total number of shares are reduced but par value of the common shares are the same.
	Answer = a-1)
	Current outstanding shares = 32,500 / $ .40 =	81,250	Shares
	Declare four -For-one stock split = $ .40 / 4 = $ .10 par value of the shares
	Shares Outstanding = $ 32,500 / $ . 10 =	3,25,000	Shares
	Answer = a-2) = New Par Value of the stock = $ .10 Per share
	Answer = b-1)
	Reverse Stock Split = $ .10 X 5 = $ .50 Per shares
	Shares Outstanding = $ 32,500 / $ .50 =	65,000	Shares
	Answer = b-2) = New Par Value of the stock = $ .50 Per share