Question 1

Bob's Auto Group has 25,000 shares of stock outstanding at a market price of $4.50 a share. What will the market price per share be if the company does a 1-for-5 reverse stock split?

Accepted Answer

A reverse stock split decreases the number of shares outstanding and increases the market price per share. In this case, a 1-for-5 reverse stock split means that for every 5 existing shares, the shareholder will receive 1 new share.

So, the number of outstanding shares will decrease from 25,000 to 5,000 (25,000/5), and each share will be worth 5 times the previous market price, which is $4.50.

Therefore, the new market price per share will be:

$4.50 x 5 = $22.50

Hence, the correct answer is C.

Question 2

Robinson's has 15,000 shares of stock outstanding with a par value of $1.00 per share and a market price of $36 a share. The balance sheet shows $15,000 in the common stock account,$315,000 in the capital in excess of par account,and $189,000 in the retained earnings account. The firm just announced a 3-for-2 stock split. What will the value of the common stock account be after the split?

Accepted Answer

After the stock split, the total number of shares outstanding will be:
15,000 * (3/2) = 22,500

Since the par value remains the same at $1.00 per share, the common stock account will still have a value of $15,000. This is because the common stock account represents the par value of the shares outstanding.

Therefore, the value of the common stock account after the split will still be $15,000.

Question 3

The Retail Outlet has 6,000 shares of stock outstanding with a par value of $1.00 per share. The current market value of the firm is $420,000. The balance sheet shows a capital in excess of par account value of $136,000 and retained earnings of $234,000. The company just announced a 2-for-1 stock split. What will the common stock account balance be after the split?

Accepted Answer

After the 2-for-1 stock split, the number of outstanding shares will double to 12,000 shares. However, the par value per share will be halved to $0.50 per share. Therefore, the common stock account balance will remain the same at $6,000 ($1.00 x 6,000 shares = $6,000 before the split and $0.50 x 12,000 shares = $6,000 after the split).

Question 4

Murphy's,Inc. has 10,000 shares of stock outstanding with a par value of $1.00 per share. The market value is $8 per share. The balance sheet shows $32,500 in the capital in excess of par account,$10,000 in the common stock account,and $42,700 in the retained earnings account. The firm just announced a 10% (small) stock dividend. What will the balance in the retained earnings account be after the dividend?

Accepted Answer

The stock dividend will increase the number of shares outstanding by 10%, from 10,000 to 11,000. The par value of the stock will remain the same, at $1.00 per share. The market value of the stock will also remain the same, at $8 per share. The total value of the stock will therefore increase from $80,000 to $88,000. The capital in excess of par account will increase by $10,000, from $32,500 to $42,500. The common stock account will increase by $1,000, from $10,000 to $11,000. The retained earnings account will decrease by $10,000, from $42,700 to $32,700.

Question 5

Samuel's has 7,000 shares of stock outstanding with a par value of $1.00 per share and a market value of $12 per share. The balance sheet shows $7,000 in the common stock account,$58,000 in the capital in excess of par account and $32,500 in the retained earnings account. The firm just announced a 50% (large) stock dividend. What is the value of the retained earnings account after the dividend?

Accepted Answer

The retained earnings account will be reduced by the amount of the dividend, which is 50% of the current balance, or $16,250. Therefore, the new balance in the retained earnings account will be $32,500 - $16,250 = $16,250.

Question 6

Edie's Health and Beauty Supply has 125,000 shares of stock outstanding with a par value of $1 per share and a market value of $5 a share. The company has retained earnings of $76,500 and capital in excess of par of $340,000. The company just announced a 1-for-5 reverse stock split. What will the par value per share be after the split?

Accepted Answer

The answer of Edie's Health and Beauty Supply has 125,000...

Question 7

The Tinslow Co. has 125,000 shares of stock outstanding at a market price of $93 a share. The company has just announced a 7-for-3 stock split. What will the market price per share be after the split?

Accepted Answer

Before the split, the total value of the 125,000 shares is:
$93/share * 125,000 shares = $11,625,000

After the split, the number of shares increases by 7/3 times, which means:
New number of shares = 125,000 * (7/3) = 291,666.67, rounded to 291,667

The stock price per share will decrease proportionally to maintain the same total value. 
The new market price per share will be:
$11,625,000 / 291,667 = $39.86, rounded to the nearest cent

Therefore, the correct answer is B.

Question 8

The Retail Outlet has 6,000 shares of stock outstanding with a par value of $1.00 per share. The current market value of the firm is $420,000. The balance sheet shows a capital in excess of par account value of $136,000 and retained earnings of $234,000. The company just announced a 2-for-1 stock split. What will the market price per share be after the split?

Accepted Answer

After a 2-for-1 stock split, the number of shares doubles to 12,000. The market value remains $420,000, so the new price per share is $420,000 / 12,000 = $35.

Question 9

Samuel's has 7,000 shares of stock outstanding with a par value of $1.00 per share and a market value of $12 per share. The balance sheet shows $7,000 in the common stock account,$58,000 in the capital in excess of par account and $32,500 in the retained earnings account. The firm just announced a 50% (large) stock dividend. What is the value of the capital in excess of par account after the dividend?

Accepted Answer

In a large stock dividend, the par value is transferred from retained earnings to common stock, and the capital in excess of par remains unchanged. Thus, the capital in excess of par account remains $58,000.

Question 10

Edie's Health and Beauty Supply has 125,000 shares of stock outstanding with a par value of $1 per share and a market value of $5 a share. The company has retained earnings of $76,500 and capital in excess of par of $340,000. The company just announced a 1-for-5 reverse stock split. How many shares of stock will be outstanding after the split?

Accepted Answer

In a 1-for-5 reverse stock split, every 5 shares are combined into 1 share. Therefore, the total number of outstanding shares will be reduced by a factor of 5. 125,000 shares divided by 5 is 25,000 shares. So after the split, there will be 25,000 shares outstanding.

Question 11

The Tinslow Co. has 125,000 shares of stock outstanding at a market price of $93 a share. The company has just announced a 5-for-3 stock split. How many shares of stock will be outstanding after the split?

Accepted Answer

A 5-for-3 stock split means that for every 3 shares of stock, shareholders will receive an additional 2 shares, thus increasing the total number of shares by 5/3 or 1.67 times the original amount. So, after the stock split, the number of outstanding shares would be: 125,000 x 1.67 = 208,333 shares. Therefore, the correct answer is E.

Question 12

Robinson's has 15,000 shares of stock outstanding with a par value of $1.00 per share and a market price of $36 a share. The balance sheet shows $15,000 in the common stock account,$315,000 in the capital in excess of par account,and $189,000 in the retained earnings account. The firm just announced a 3-for-2 stock split. What will the market price per share be after the split?

Accepted Answer

After the split, the number of shares outstanding will increase by 50% (since it is a 3-for-2 split). Therefore, the new number of shares outstanding will be:

15,000 x 1.5 = 22,500

The total value of the stock will remain the same, so we can set up the following equation:

$1.00 x 22,500 = $36 x X

Solving for X, we get:

X = $24

Therefore, the market price per share after the split will be $24.

Question 13

Robinson's has 15,000 shares of stock outstanding with a par value of $1.00 per share and a market price of $36 a share. The balance sheet shows $15,000 in the common stock account,$315,000 in the capital in excess of par account,and $189,000 in the retained earnings account. The firm just announced a 3-for-2 stock split. How many shares of stock will be outstanding after the split?

Accepted Answer

A 3-for-2 stock split means that for every two shares owned, shareholders will receive an additional three shares.

So, for Robinson's, the number of shares outstanding will be:

15,000 x (3/2) = 22,500

Therefore, after the split, there will be 22,500 shares outstanding.

Question 14

Samuel's has 7,000 shares of stock outstanding with a par value of $1.00 per share and a market value of $12 per share. The balance sheet shows $7,000 in the common stock account,$58,000 in the capital in excess of par account and $32,500 in the retained earnings account. The firm just announced a 50% (large) stock dividend. What is the value of the common stock account after the dividend?

Accepted Answer

The answer of Samuel's has 7,000 shares of stock outstanding...

Question 15

Murphy's,Inc. has 10,000 shares of stock outstanding with a par value of $1.00 per share. The market value is $8 per share. The balance sheet shows $32,500 in the capital in excess of par account,$10,000 in the common stock account and $42,700 in the retained earnings account. The firm just announced a 10% (small) stock dividend. What will the market price per share be after the dividend?

Accepted Answer

The answer of Murphy's,Inc. has 10,000 shares of stock outstanding...

Question 16

Robinson's has 15,000 shares of stock outstanding with a par value of $1.00 per share and a market price of $36 a share. The balance sheet shows $15,000 in the common stock account,$315,000 in the capital in excess of par account,and $189,000 in the retained earnings account. The firm just announced a 3-for-2 stock split. What will the capital in excess of par account value be after the split?

Accepted Answer

A stock split does not affect the capital in excess of par account. Therefore, the value remains $315,000 after the split.

Question 17

The common stock of Margot,Inc. is selling for $56 a share. The par value per share is $1. Currently,the firm has a total market value of $89,600. How many shares of stock will be outstanding if the firm does a 2-for-1 stock split?

Accepted Answer

A 2-for-1 stock split doubles the number of shares. The current market value is $89,600, and the price per share is $56, so there are 1,600 shares currently. After the split, there will be 3,200 shares outstanding.

Question 18

A firm has a market value equal to its book value. Currently,the firm has excess cash of $400 and other assets of $7,600. Equity is worth $8,000. The firm has 200 shares of stock outstanding and net income of $900. The firm has decided to pay out all of its excess cash as a cash dividend. What will the earnings per share be after the dividend is paid?

Accepted Answer

The answer of A firm has a market value equal...

Question 19

The Retail Outlet has 6,000 shares of stock outstanding with a par value of $1.00 per share. The current market value of the firm is $420,000. The balance sheet shows a capital in excess of par account value of $136,000 and retained earnings of $234,000. The company just announced a 2-for-1 stock split. What will the retained earnings account balance be after the split?

Accepted Answer

A stock split does not affect the retained earnings account balance. It only changes the number of shares outstanding and the par value per share. Therefore, the retained earnings will remain at $234,000 after the split.

Question 20

Samuel's has 7,000 shares of stock outstanding with a par value of $1.00 per share and a market value of $12 per share. The balance sheet shows $7,000 in the common stock account,$58,000 in the capital in excess of par account,and $32,500 in the retained earnings account. The firm just announced a 50% (large) stock dividend. What is the market value per share after the dividend?

Accepted Answer

After the stock dividend, the number of outstanding shares will increase to 10,500 (7,000 x 1.5). 
The total value of the stock will remain the same ($84,000 = 7,000 x $12), but it will now be distributed among more shares.
This means that the new market value per share will be $8.00 ($84,000 / 10,500 shares).

Quiz 19: Dividends and Other Payouts

Bob's Auto Group has 25,000 shares of stock outstanding at a market price of $4.50 a share. What will the market price per share be if the company does a 1-for-5 reverse stock split?

The Tinslow Co. has 125,000 shares of stock outstanding at a market price of $93 a share. The company has just announced a 7-for-3 stock split. What will the market price per share be after the split?

The Tinslow Co. has 125,000 shares of stock outstanding at a market price of $93 a share. The company has just announced a 5-for-3 stock split. How many shares of stock will be outstanding after the split?

The common stock of Margot,Inc. is selling for $56 a share. The par value per share is $1. Currently,the firm has a total market value of $89,600. How many shares of stock will be outstanding if the firm does a 2-for-1 stock split?