Question
In: Finance
The owners' equity accounts for Vidi International are shown here: Common stock ($.40 par value)...
| The owners' equity accounts for Vidi International are shown here: |
| Common stock ($.40 par value) | $ | 40,000 |
| Capital surplus | 350,000 | |
| Retained earnings | 768,120 | |
| Total owners’ equity | $ | 1,158,120 |
| a-1. |
If the company declares a two-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-four 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.) |
Solutions
Expert Solution
Total common stock par value = $40,000
Par value of 1 stock = $0.40
Total number of shares outstanding = Total common stock per value/Par value of 1 stock
= 40,000/0.40
= 100,000
Solution a-1. The two-for-one stock split means a person holding one stock would get 2 stocks
Hence, after stock split, the total number of stocks outstanding would be = 100,000 * 2 = 200,000
Solution a-2. Total par value of the stocks = $40,000
New number of shares outstanding = 200,000
The new par value of a stock = Total par value of the stocks/New number of shares outstanding = 40,000/200,000 = $0.200
Solution b-1. A one-for-four reverse stock split means that a person holding four stocks would now get 1 stock
Thus, the total number of outstanding shares would get reduced by 4
New number of shares outstanding = 100,000/4 = 25,000
Solution b-2. The new par value of a stock = Total par value of the stocks/New number of shares outstanding = 40,000/25,000 = $1.600
jeff jeffy answered 1 year agoRelated Solutions
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