1) A firm has the items given below on its balance sheet:
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 following:
i) Cash dividend of $1 per share
ii) 10 percent stock dividend (fair market value of stock is $13 per share)
iii) A 3-for-1 stock split
iv) A 1-for-2 reverse stock split
2) Company whose stock is selling for $60 has the balance sheet which is given below:
Preferred Stock: 1,000,000
Common Stock ($12 par; 100,000 shares outstanding): 1,200,000
Retained Earnings: 12,000,000
a) Create a latest balance sheet illustrating effects of a 3-for-1 stock split. Determine the new price of the stock?
b) Create a latest balance sheet illustrating effects of a 10 percent stock dividend. Determine the approximate new price of stock?