The owners\' equity accounts for Freya International are shown here Capital surp

Question

The owners' equity accounts for Freya International are shown here Capital surplus Retained earnings Common stock ($.50 par value) 42,500 345,000 758,120 Total owners' equity $1,145,620 a-1 If Freya declares a two-for-one stock split, how many shares are outstanding now? (Do not round intermediate calculations.) New shares outstanding a-2 What is the new par value per share? (Do not round intermediate calculations. Round your answer to 3 decimal places, e.g., 32.161.) New par value er share b-1 If Freya declares a one-for-four 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. Round your answer to 2 decimal places, e.g., 32.16.]) New par value er share

Explanation / Answer

Part A - 1

Common stock at $0.50 par value = 42,500

Common stock at $1 par value = 42,500 * 2

Common stock at $1 par value = 85,000

To find the new shares outstanding, we multiply the current shares outstanding times the ratio of new shares to oldshares, so:

New shares outstanding = 85,000 * (2 / 1) = 170,000

Part A - 2

The equity accounts are unchanged except that the par value of the stock is changed by the ratio of old shares tonew shares, so the new par value is:

New par value = $.50 * (1 / 2) = $0.250 per share

Part B - 1

To find number of shares outstanding after one-for-four reverse stock split:

Total stock at $1 par value = 85,000

New SHare Outstanding = 85,000/ 4

New SHare Outstanding = 21,250

Part B - 2

The equity accounts are unchanged except that the par value of the stock is changed by the ratio of old shares tonew shares, so the new par value is:

New par value = $0.50 * (4/ 1) = $2.00 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.