Adrusco Corp. has the following B.S. LTD Bds (7 1/6%) 10,000,000 O.E. CS($1.oopa
ID: 2649550 • Letter: A
Question
Adrusco Corp. has the following B.S.
LTD
Bds (7 1/6%) 10,000,000
O.E.
CS($1.oopar) 20,000,000
Surplus 5,000,000
PS( $10.00 par, 8 1/2%) 30,000,000
surplus 10,000,000
RE 40,000,000
1 Assume Andursco's common stock is quoted on the OTCBB at 159/ 7/19. The VP of finance recommends a 4-for -1 split to increase trading activity. show the effects of this action on the BS, and on a shareholder of the company.'
2 Assume andrusco's stock is trading in the Pink Sheetat 1 1/11 . The VP of finance recommand a 1-for-10 split. Show the effects of this action on the BS and a shareholder.
3 Andrusco has just announced a 12% stock dividend with the stock priced at 63.79. show the effects of this action on the company's BS and a shareholder
Explanation / Answer
1 Assume Andursco's common stock is quoted on the OTCBB at 159/ 7/19. The VP of finance recommends a 4-for -1 split to increase trading activity. show the effects of this action on the BS, and on a shareholder of the company.'
In this scenario
Post split Par Value = 1 * 1/4 = 0.25
No of Common Stock outstanding post split = 20,000,000 * 4 = 80,000,000
Effects of this action on the BS, and on a shareholder of the company
Balance Sheet
LTD
Bds (7 1/6%) 10,000,000
O.E.
CS(80,000,000 Outstanding Share @ $0.25 Par) 20,000,000
Surplus 5,000,000
PS( $10.00 par, 8 1/2%) 30,000,000
surplus 10,000,000
RE 40,000,000
2 Assume andrusco's stock is trading in the Pink Sheetat 1 1/11 . The VP of finance recommand a 1-for-10 split. Show the effects of this action on the BS and a shareholder.
In this scenario
Post split Par Value = 1 * 10/1 = 10
No of Common Stock outstanding post split = 20,000,000 * 1/10 = 2,000,000
Balance Sheet
LTD
Bds (7 1/6%) 10,000,000
O.E.
CS(2,000,000 Outstanding Share @ $ 10 Par) 20,000,000
Surplus 5,000,000
PS( $10.00 par, 8 1/2%) 30,000,000
surplus 10,000,000
RE 40,000,000
3 Andrusco has just announced a 12% stock dividend with the stock priced at 63.79. show the effects of this action on the company's BS and a shareholder
Assuming Large Stock Dividend
No of Outstanding Share = 20,000,000
No of Stock Dividend = 20,000,000 * 12% = 2,400,000
Common Stock would increase by = 2400,000 * 1 = $ 2,400,000
Retained Earning would decrease by = $ 2,400,000
Balance Sheet
LTD
Bds (7 1/6%) 10,000,000
O.E.
CS(22,400,000 Outstanding Share @ $ 1 Par) 22,400,000
Surplus 5,000,000
PS( $10.00 par, 8 1/2%) 30,000,000
surplus 10,000,000
RE 37,600,000
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