The owners’ equity accounts for Alexander International are shown here: Common s

Question

The owners’ equity accounts for Alexander International are shown here: Common stock ($. 50 par value) $20,000 Capital surplus 285,000 Retained earnings 638,120 Total owners’ equity $943,120  

a. Alexander declares a four- for- one stock split. How many shares are outstanding now? What is the new par value per share?

a. Alexander declares a four- for- one stock split. How many shares are outstanding now? What is the new par value per share?

b. Alexander declares a one- for- fi ve reverse stock split. How many shares are out-standing now? What is the new par value per share?

Explanation / Answer

Current face value of share = $0.50

Number of shares outstanding now = $20,000÷$0.50 = 40,000

a)

Face value of share = $0.50÷4 = $0.125

Number of shares outstanding = $20,000÷$0.125 = 160,000

c)

Face value of share = $0.50×5 = $2.50

Number of shares outstanding = $20,000÷$2.50 = 8,000

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