If Freya declares a two-for-one stock split, how many shares are outstanding now
ID: 2766553 • 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
a-1)
If Freya declares a two-for-one stock split, how many shares are outstanding now?
Common stock = $42,500 / .50
= 85,000 shares
New shares outstanding:
Shares are split 2 for 1 = 85000 *2/1
= 170,000 shares
Therefore, 170,000 shares are outstanding now.
a-2)
Calculation of the new par value per share:
Par value of the share = $42,500 /170,000 shares
= $0.25 per share
Therefore, new share price is $0.25.
b-1)
If Freya declares a one-for-four reverse stock split, how many shares are outstanding now?:
Common stock = $42,500 / .50
= 85,000 shares
New shares outstanding:
Shares are split 4 for 1 = 85000 *4/1
= 340,000 shares
Therefore, 340,000 shares are outstanding now.
b-2)
Calculation of the new par value per share:
Par value of the share = $42,500 /340,000 shares
= $0.125 per share
Therefore, new share price is $0.125.