Stock split- Firm Growth Industries\' current stockholders\' equity account is a

Question

Stock split- Firm Growth Industries' current stockholders' equity account is as follows: Common stock (00,0 shares at 3 par) $ 400,000 1,800,000 200,000 Paid-in capital in excess of par Retained earnings Total stockholders' equity $3,200,000 a. Indicate the change, if any, expected if the firm declares a 2-for-1 stock split. b. Indicate the change, if any, expected if the firm declares a 1-for-1 /2 reverse stock split. c. Indicate the change, if any, expected if the firm declares a 3-for-1 stock split. d. Indicate the change, if any, expected if the firm declares a 6-for-1 stock split. e. Indicate the change, if any, expected if the firm declares a 1-for-4 reverse stock split.

Explanation / Answer

Stock spilt does not effect the market cap of company hence it does not effect market value of firm.Market capitalisation remain same even after spilt it only effect Number of share outstanding.

Particulars Existing No of share adjustment New No of share New value of share A 600000 600000×(2÷1) 1200000 1.5(3÷2) B 600000 600000×(1÷1.5) 400000 4.5(3×1.5) C 600000 600000×(3÷1) 1800000 1(3÷1)

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