The owners’ equity accounts for Overby International are shown here: a. Suppose

Question

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

a. Suppose the company declares a two-for-one stock split.

How many shares are outstanding now? (Do not round intermediate calculations and round your answer to the nearest whole number, e.g., 32.)

New shares outstanding            

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

b. Suppose the company declares a one-for-five reverse stock split.

How many shares are outstanding now? (Do not round intermediate calculations and round your answer to the nearest whole number, e.g., 32.)

New shares outstanding            

What is the new par value per share? (Do not round intermediate calculations and round your answer to the nearest whole number, e.g., 32.)

New par value            $  per share

Common stock ($1 par value) $ 55,000 Capital surplus 239,000 Retained earnings 790,000 Total owners’ equity $ 1,084,000

Explanation / Answer

note: number of shares currently outstanding = $55,000 / $1 par value

=>55,000 shares

a.If two for one stock split is declared.

two shares will be given for 1 share held.

number of shares outstanding will be = 55,000 * 2 =>110,000.

new par value per share = existing total par value / new number of shares outstanding

=>$55,000 / 110,000

=>$0.50.per share.

b. If one for five reverse stock split is declared.

1 share is given for 5 shares outstanding

new shares outstanding = (55,000 / 5) *1 =>11,000.

new par value per share = existing total par value / new outstanding shares

=>$55.000 / 11,000 =>$5.00 per share

Related Questions

Navigate

• Browse (All)
• Browse T
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.