The company with the common equity accounts shown here has decided on a two-for-
ID: 2750663 • Letter: T
Question
The company with the common equity accounts shown here has decided on a two-for-one stock split. The firm’s 35-cent-per-share cash dividend on the new (postsplit) shares represents an increase of 5 percent over last year’s dividend on the presplit stock. Common stock ($1 par value) $ 490,000 Capital surplus 1,557,000 Retained earnings 3,882,000 Total owners’ equity $ 5,929,000 Requirement 1: What is the new par value of the stock? (Do not round intermediate calculations. Round your answer to 2 decimal places (e.g., 32.16).) New par value $ per share Requirement 2: What was last year’s dividend per share? (Do not round intermediate calculations. Round your answer to 2 decimal places (e.g., 32.16).) Dividends per share last year $
Explanation / Answer
a)
New par value of stock:
= $1÷2
= $0.50
b)
Current year dividend for 2 shares:
= $0.50×2×35%
= $0.35
Last year dividend:
= $0.35÷105%
= $0.33