balance sheet

Question

A firm has the following items on a its balance sheet:

 

cash                                                                                20,000,000

inventory                                                                       134,000,000

notes payable to bank                                                       31,500,000

common stock (10 par;1,000,000 shares outstanding          10,000,000

retained earnings                                                              98,500,000

 

Describe how each of these accounts would appear after the following:

   a.) A cash dividend of $1 per share

   b.) A 10 percent stock dividend (fair market value of stock is $13 per share)

   c.) A 3-for-1 stock split

   d.) A 1-for-2 reverse stock split

Answer 1

Hi Amy,

 

a.)The cash dividend payout would lower the cash account by $1,000,000 to 19,000,000

 

b.) The 10% dividend would lower the cash account by $1,300,000 (1.3% of 13 x shares outstanding)

 

c.) The shares outstanding would increase to 3,000,000 an the share price would now be $4.33/share. This keeps the total market value the same as it was before the split.

 

d.) The shares outstanding would be lowered to 500,000 and the share price would be $26/share

 

Hope this helps

Jim