Question

A firm has the following balance sheet: Assets Liabilities and Equity Cash 20,000 Accounts payable 20,000 Accounts receivable 163,000 Long-term debt 117,000 Inventory 75,000 Common stock ($10 par 30,000 3,000 shares outstanding) Plant and equipment 210,000 Additional paid-in capital 158,000 Retained earnings 143,000 $468,000 $468,000 a. Construct a new balance sheet showing the impact of a three-for-one split. If the current market price of the stock is $53, what is the price after the split Round the par value and the market price after the split to the nearest cent, the number of shares outstanding to the nearest whole number, and the other answers to the nearest dollar Liabilities and Equity Assets Accounts payable Cash Long-term debt Accounts receivable Common stock f$ Inventory par shares outstanding)

Answer 1

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- 2x Σ AutoSum : A Fill 2 Sort & 2 Clear Filter Editing m Find & Select Cells PE EPS, STOCK DIVIDEND - Microsoft Excel (Product Activation Failed) File Home Insert Page Layout Formulas Data Review View Add-Ins % Cut Calibri 11 AA = = = Dr Wrap Text General Ea Copy Paste Format Painter BIU - D A Merge & Center - $ % , :.: Formatting as Table Styles Clipboard Font Alignment Number Styles CO283 - fx 2 CG CH CI CJ CK CL CM CN 281 a three for one stock split 282 that is 3 shares are given for every share held 283 no change in any other item except par value, it will be now 10/3 = 3.33 284 PAR VALUE = $ 3.33 C O - CP ca a 285 CURRENT PRICE = $53 PRICE AFTER SPLIT = $53/3 = $17.67 286 287 288 289 290 291 292 Existing number of shares 3000 After split, number of shares outstanding = 3000 X 3 = 9000 293 294 BALANCE SHEET ASSETS CASH ACCOUNTS RECEIAVBLE INVENTORY 20000 163000 75000 LIABILITIES & EQUITY ACCOUNTS PAYABLE LONG TERM DEBT COMMON STOCK ($3.33 PAR, 9000 SHARES OUTSTANDING) ADDITIONAL PAID IN CAPITAL RETAINED EARNINGS 20000 117000 30000 PLANT & EQUIPMENT 295 296 297 298 299 300 210000 158000 143000 468000 468000 301 price of common stock after split = HIGH LOW TARGET PRICE STOCK DIV NAV HEDGE FUND ME ferences EV PE EPS DIV 17.67 ABNORMAL deberk MARGIN MONEY marginal tax PB ROPI H Rea APV ROSS price quote EVA MVAJ B0 120% * ELEB 0 + 03:26 20-11-2019 ENG

- 2x % Cut CQ & 308 309 So 311 313 PE EPS, STOCK DIVIDEND - Microsoft Excel (Product Activation Failed) File Home Insert Page Layout Formulas Data Review View Add-Ins Σ AutoSum : A Calibri 11 AA = = = Dr Wrap Text General E Copy Fill Z Paste BIU -A E E E Merge & Center - $ % & ... Conditional Format Cell Insert Delete Format Format Painter Sort & Find & Formatting as Table Styles 2 Clear Filter Select Clipboard Font Alignment Number Styles Cells Editing CN325 fx 2 CG CH CI CJ CK CL CM CN CO CP 306 10% stock dividend 307 additional shares to be issued = 3000 x 10% = 300 as par value is $10 and current price is $53 $43 (53-10) per share will be added to additional paid in capital 310 additional paid in capital will increase by 12900 [300 x 43] 312 common stock will increase by 300 x $10 3000 retained earnings will decrease by ( 300 x $53) 15900 314 new price of common stock = 53/1.1 = 48.18 316 BALANCE SHEET ASSETS LIABILITIES & EQUITY 318 CASH 20000 ACCOUNTS PAYABLE 20000 319 ACCOUNTS RECEIAVBLE 163000 LONG TERM DEBT 117000 320 INVENTORY 75000 COMMON STOCK 33000 [30000 +3000] 321 ($10 PAR, 3300 SHARES OUTSTANDING) PLANT & EQUIPMENT 210000 ADDITIONAL PAID IN CAPITAL 170900 [158000 + 12900] 323 RETAINED EARNINGS 127100 [143000-15900] 324 468000 468000 325 326 new price of common stock = 53/1.1 = 48.18 M HIGH LOW TARGET PRICE STOCK DIV NAV HEDGE FUND ME EV PE EPS DIV ABNORMAL deberk MARGIN MONEY marginal tax PB ROPI APV ROSSprice quote EVA MVAI Rea 1 ferences B0 120% DO 4 * 4 315 317 322 K 0 + ENG 20-11-2019