The owners’ equity accounts for Masterson International are shown here: Common stock ($1 par value) $75,000 Capital surplus 224,000 Retained earnings 740,000 Total owners’ equity $1,039,000 a-1.Suppose the company declares a two-for-one stock split. How many shares are outstanding now? (Do not round intermediate calculations and round your answer to the nearest whole number, e.g., 32.)a-2.What is the new par value per share? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)b-1.Suppose the company declares a one-for-five reverse stock split. How many shares are outstanding now? (Do not round intermediate calculations and round your answer to the nearest whole number, e.g., 32.)b-2.What is the new par value per share? (Do not round intermediate calculations and round your answer to the nearest whole number, e.g., 32.)

Outstanding shares are the stock that the shareholders of a company hold in the open market. As with individual shareholders, this includes restricted shares that are held by company executives and institutional investors. On a company's balance sheet, they are represented as capital stock. Par value = minimum amount at which a market instrument is issued to investors (a) a-1 – New shares outstanding = 75,000 Shares x (2/1) New shares outstanding = 150,000 Shares a-2 – New Par Value = $1 x (1/2) New Par Value = $0.50 per share (b) b-1 – New shares outstanding = 75,000 Shares x (1/5) New shares outstanding = 15,000 Shares b- 2 New Par Value = $1 x (5/1) New Par Value = $5.00 per share

Answered: The owners’ equity accounts for…

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 owners’ equity accounts for Masterson International are shown here:


Common stock ($1 par value)	$	75,000
Capital surplus		224,000
Retained earnings		740,000

Total owners’ equity	$	1,039,000


a-1.	Suppose the company declares a two-for-one stock split. How many shares are outstanding now? (Do not round intermediate calculations and round your answer to the nearest whole number, e.g., 32.)
a-2.	What is the new par value per share? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)
b-1.	Suppose the company declares a one-for-five reverse stock split. How many shares are outstanding now? (Do not round intermediate calculations and round your answer to the nearest whole number, e.g., 32.)
b-2.	What is the new par value per share? (Do not round intermediate calculations and round your answer to the nearest whole number, e.g., 32.)

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