If Freya declares a two-for-one stock split, how many shares are outstanding now
ID: 1171894 • Letter: I
Question
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.)
The owners' equity accounts for Freya International are shown here.
Explanation / Answer
Solution: a-1 New shares outstanding 220,000 Working Notes: two-for-one stock split , means 2 new shares for every 1 old share. New shares outstanding = existing no of shares x (2/1) =110,000 x 2/1 =220,000 before split currently no. of shares = 44,000/0.40 = 110,000 shares [common stock value / par value] a-2 New par value $0.200 per share Working Notes: Stock split have no impact on other accounts of equity only par value of stock will be changed by the ratio of new shares to old shares New par value = old par value x (1/2) New par value = $0.40 x (1/2) New par value = $0.200 b-1 New shares outstanding 27,500 shares Working Notes: One-for-four reverse stock split means 1 share for every 4 shares New shares outstanding = existing no of shares x (1/4) =110,000 x 1/4 =27,500 before split currently no. of shares = 44,000/0.40 = 110,000 shares [common stock value / par value] b-2 New par value $1.60 per share Working Notes: Reverse Stock split have no impact on other accounts of equity only par value of stock will be changed by the ratio of new shares to old shares New par value = old par value x (4/1) New par value = $0.40 x (4/1) New par value = $1.60 Please feel free to ask if anything about above solution in comment section of the question.