One way to lower the market price of a firm's stock is via a stock split....

 

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One way to lower the market price of a firm's stock is via a stock split. Rock-O Corporation finds itself in a different situation: Its stock has been selling at relatively low prices. To increase the market price of the stock, the company chooses to use a reverse stock split of 2- for-3. The company currently has 700,000 common shares outstanding and no preferred stock. The common stock carries a par value of $1. At this time, the paid-in capital in excess of par is $7,000,000, and the firm's retained earnings are $3,500,000. To Do Create a spreadsheet to determine the following: a. The stockholders' equity section of the balance sheet before the reverse stock split. b. Calculate the effect on the par value and number of shares after the reverse plit. Solution No. of common shares outstanding 700,000 1.00 Par value of each share Paid-in capital in excess of par Retained earnings of the firm Reverse stock split 7,000,000 $ 3,500,000 for 3.00 a. The stockholders' equity section of the balance sheet before the reverse stock split. Par value of common stock Paid-in capital in excess of par Retained earnings 2$ 7,000,000 2$ 3,500,000 Common stock b. Calculate the effect on the par value and number of shares after the reverse plit. Number of common shares after reverse split Par value of each share after reverse split The stockholders' equity section of the balance sheet after the reverse stock split. Par value of common stock Paid-in capital in excess of par Retained earnings Common stock $ 7,000,000 3,500,000 $ One way to lower the market price of a firm's stock is via a stock split. Rock-O Corporation finds itself in a different situation: Its stock has been selling at relatively low prices. To increase the market price of the stock, the company chooses to use a reverse stock split of 2- for-3. The company currently has 700,000 common shares outstanding and no preferred stock. The common stock carries a par value of $1. At this time, the paid-in capital in excess of par is $7,000,000, and the firm's retained earnings are $3,500,000. To Do Create a spreadsheet to determine the following: a. The stockholders' equity section of the balance sheet before the reverse stock split. b. Calculate the effect on the par value and number of shares after the reverse plit. Solution No. of common shares outstanding 700,000 1.00 Par value of each share Paid-in capital in excess of par Retained earnings of the firm Reverse stock split 7,000,000 $ 3,500,000 for 3.00 a. The stockholders' equity section of the balance sheet before the reverse stock split. Par value of common stock Paid-in capital in excess of par Retained earnings 2$ 7,000,000 2$ 3,500,000 Common stock b. Calculate the effect on the par value and number of shares after the reverse plit. Number of common shares after reverse split Par value of each share after reverse split The stockholders' equity section of the balance sheet after the reverse stock split. Par value of common stock Paid-in capital in excess of par Retained earnings Common stock $ 7,000,000 3,500,000 $

Answer rating: 100% (QA)

C20 fe SUMC17C19 A E F 1 No of common shares outstanding 700000 2 Par value ... View the full answer