For the company in Problem 2, show how the equity accounts will change if: a. The company declares a 4-for-1 stock split. How many shares are outstanding now? What is the new par value per share? b. The company declares a 1-for-5 reverse stock split. How many shares are outstanding now? What is the new par value per share? Problem 2: The owners’ equity accounts for Vulcano International are shown here: Common stock ($.50 par value) …………….. $ 20,000 Capital surplus …………………………………….. 210,000 Retained earnings ………………………………… 587,300 Total owners’ equity …………………………… $ 817,300 a. If the company’s stock currently sells for $42 per share and a 10 percent stock dividend is declared, how many new shares will be distributed? Show how the equity accounts would change. b. If the company declared a 25 percent stock dividend, how would the accounts change?
