Homework SourseThe owners equity accounts for Southern Lights International
The owners\' equity accounts for Southern Lights International are shown here:
a-1. If the company declares a five-for-one stock split, how many shares will be outstanding? (Do not round intermediate calculations.)
New shares outstanding
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.)
New par value $ per share
b-1. If the company declares a one-for-six reverse stock split, how many shares are outstanding now? (Do not round intermediate calculations.)
New shares outstanding
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.)
New par value $ per share
| Common stock ($.60 par value) | $ | 45,000 | |
| Capital surplus | 340,000 | ||
| Retained earnings | 748,120 | ||
| Total owners’ equity | $ | 1,133,120 | |
Solution
Solution a1:
Existing number of shares = $45,000 / 0.60 = 75000 shares
If the company declares a five-for-one stock split, new shares outstanding = 75000 * 5= 375000 shares
Solution a2:
New part value per share = $0.60 / 5 = $0.12 per share
Solution b1:
If the company declares a one-for-six reverse stock split, nos of shares outstanding = 75000 / 6 = 12500 shares
Solution b2:
New par value per share = $0.60 * 6 = $3.60 per share
