Common Stock ($1 par value) $30,000 Capital surplus 185,000 Retained Earnings 62
ID: 2659490 • Letter: C
Question
Common Stock ($1 par value) $30,000
Capital surplus 185,000
Retained Earnings 627,500
Total Owners Equity 842,500
A.) If Hexagon stock currently sells for $37 per share and a 10 percent stock dividend is declared, how many new shares will be distributed? Show how the equity accounts would change.
B.) If Hexagon declared a 25 percent stock dividend, how would the accounts change?
Stock Splits
Show how the equity accounts will change if:
a.) Hexagon declares a four for four stock split. How many shares are outstanding now? What is the par valu per share?
b.) Hexagon declares a four for five reverse split. How many shares are outstanding now? What is the new par value per share?
Explanation / Answer
A.) If Hexagon stock currently sells for $37 per share and a 10 percent stock dividend is declared, how many new shares will be distributed? Show how the equity accounts would change.
10% stock dividend = 30000 shares x 10% = 3000 shares.
Total outstanding shares = 33000 shares.
Given current value of share = $37 => Total market value = 30000 shares x 37 = $1110000
Hence, Current value after stock dividend = $1110000 / 33000 = $33.64
B.) If Hexagon declared a 25 percent stock dividend, how would the accounts change?
10% stock dividend = 30000 shares x 25% = 7500 shares.
Total outstanding shares = 7500 shares.
Given current value of share = $37 => Total market value = 30000 shares x 37 = $1110000
Hence, Current value after stock dividend = $1110000 / 37500 = $29.60
Stock Splits
a.) Hexagon declares a four for four stock split. How many shares are outstanding now? What is the par valu per share?
four for four stock split = 30000 shares x 4/4 = 30000 shares.
shares outstanding now = 30000 shares.
par value of share = $1
b.) Hexagon declares a four for five reverse split. How many shares are outstanding now? What is the new par value per share?
Reverse split = 30000 shares x 5/4 = 37500 shares.
shares outstanding now = 37500 shares
par value = $30000 / 37500 = $0.8
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