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 surplus1,557,000 Retained earnings3,882,000 Total owners’ equity$ 5,929,000 a.What is the new par value of the stock? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)b.What was last year’s dividend per share? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)

Par value refers to the value of a share or a security that is determined by the corporate charter. (a) The new par value of stock has been calculated as follows: New par value of stock=$1×12 =$0.50 (b) The calculation of last year dividend per share has been made as follows: Last year dividend per share=$0.70(1+0.05) =$0.67 Note: Post split dividend=2×$0.35 =$0.70

Answered: The company with the common equity…

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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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


a.	What is the new par value of the stock? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)
b.	What was last year’s dividend per share? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)