Question

UCONN Group has the following items in its current balance sheet:

Common Stock 5,000,000 shares authorized, 1,200,000 issued. $6,000,000

Capital Surplus $3,600,000

Treasury Stock on Common 100,000 shares $1,320,000

Cumulative Preferred Stock 17,000,000 authorized {8%} $2 par $12,000,000

Retained Earnings $30,180,000

1.) Using the What was the average selling price of UCONN Group’s common stock shares that are listed on the current balance sheet.?

2.) What was the average selling price of UCONN Group’s preferred stock shares that are on the current balance sheet?

3.) If UCONN Group announces a 4 for 1 stock split of the cumulative preferred, then what is the new total amount of the preferred stock?

4.) If UCONN Group were to provide for a 10% common stock dividend, then how many new shares are to be mailed to existing shareholders?

Answer 1

1)

Common stock = $6,000,000

Capital surplus = $3,600,000

Common stock paid in capital = Common stock + Capital surplus

= $6,000,000 + $3,600,000

= $9,600,000

Average selling price of UCONN Group’s common stock shares = Common stock paid in capital/Number of common shares issued

= 9,600,000/1,200,000

= $8

2)

Average selling price of UCONN Group’s preferred stock shares = $2

3)

Number of preferred shares issued = Preferred stock/Par value of 1 preferred share

= 12,000,000/2

= 6,000,000

UCONN Group announces a 4 for 1 stock split of the cumulative preferred

New total amount of the preferred stock = 6,000,000 x 4

= 24,000,000

4)

UCONN Group provides for a 10% common stock dividend

Number of outstanding common shares =  Number of common shares issued - Number of Treasury shares

= 1,200,000 - 100,000

= 1,100,000

New shares to be mailed to existing shareholders = Number of outstanding common shares x Stock dividend percentage

= 1,100,000 x 10%

= 110,000