Bacon Inc. has the following stockholders’ equity section in its May 31, 2019, comparative balance sheets: May 31, 2019April 30, 2019Paid-in capital: Preferred stock, $120 par value, 9%, cumulative, 200,000 shares authorized, 140,000 shares issued and outstanding$16,800,000 $16,800,000 Common stock, $5 par value, 1,000,000 shares authorized, 600,000 and 540,000 shares issued, respectively ? 2,700,000 Additional paid-in capital 26,100,000 23,220,000 Retained earnings 36,200,000 34,640,000 Less: Treasury common stock, at cost; 72,000 shares and 68,000 shares, respectively (4,412,000) (4,148,000)Total stockholders' equity$? $73,212,000 g. Assume that instead of the stock dividend described in f, the board of directors authorized a 2-for-1 stock split on June 1 when the market price of the common stock was $70 per share.1. What will be the par value, and how many shares of common stock will be authorized after the split? (Round "Par value" answer to 2 decimal places.)

Answered: Bacon Inc. has the following…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Bacon Inc. has the following stockholders’ equity section in its May 31, 2019, comparative balance sheets:

	May 31, 2019	April 30, 2019
Paid-in capital:
Preferred stock, $120 par value, 9%, cumulative, 200,000 shares authorized, 140,000 shares issued and outstanding	$	16,800,000		$	16,800,000
Common stock, $5 par value, 1,000,000 shares authorized, 600,000 and 540,000 shares issued, respectively		?			2,700,000
Additional paid-in capital		26,100,000			23,220,000
Retained earnings		36,200,000			34,640,000
Less: Treasury common stock, at cost; 72,000 shares and 68,000 shares, respectively		(4,412,000	)		(4,148,000	)
Total stockholders' equity	$	?		$	73,212,000

g. Assume that instead of the stock dividend described in f, the board of directors authorized a 2-for-1 stock split on June 1 when the market price of the common stock was $70 per share.

1. What will be the par value, and how many shares of common stock will be authorized after the split? (Round "Par value" answer to 2 decimal places.)

Expert Solution

Step 1

SPLITTING OFF SHARE

A stock split is a decision by a company's board of directors to increase the number of shares outstanding by issuing more shares to current shareholders.

Stock splits divide a company's shares into more shares, which in turn lowers a share's price and increases the number of shares available