The owners\' equity accounts for Freya International are shown here. If Freya de
ID: 2723159 • Letter: T
Question
The owners' equity accounts for Freya International are shown here.
If Freya declares a two-for-one stock split, how many shares are outstanding now? (Do not round intermediate calculations.)
What is the new par value per share? (Do not round intermediate calculations. Round your answer to 3 decimal places, e.g., 32.161.)
If Freya declares a one-for-four reverse stock split, how many shares are outstanding now? (Do not round intermediate calculations.)
What is the new par value per share? (Do not round intermediate calculations. Round your answer to 2 decimal places, e.g., 32.16.)
Common stock ($.50 par value) $ 38,000 Capital surplus 330,000 Retained earnings 728,120 Total owners’ equity $ 1,096,120
Explanation / Answer
Common Stock Par value = $38,000
Par value of stock = $0.50
Number of share outstanding = $38,000 / $0.50
= 76,000
Number of share outstanding is 76,000.
a-1.
Company declare two for one stock Split, it mean company offer two stock for every one stock
So number of stock after split = 76,000 × 2
= 152,000
Hence, after split number of stock will be 152,000.
a-2.
After split Par value of Stock = $0.50 / 2
= $0.25
Hence, after split par value of stock will be $0.25.
b-1
Instead of split the stock company declare reverse split of stock in 1 for 4 stock. 1 for 4 stock split mean for every four stock inventor will receive only one stock.
Number of stock after reverse split = 76,000 / 4
= 19,000
Hence, number of stock after split will be 19,000.
b-2
Par value of stock after reverse split = $0.50 × 4
= $2.00
Hence, Par value of stock after reverse split is $2.00.
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