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The owners' equity accounts for Freya International are shown here. Common stock ($.50 par...

Question:

The owners' equity accounts for Freya International are shown here.

Common stock ($.50 par value) = $38,000

Capital surplus = 330,000

Retained earnings = 728,120

Total owners' equity = $1,096,120

a-1 If Freya declares a two-for-one stock split, how many shares are outstanding now? (Do not round intermediate calculations.)

a-2 What is the new par value per share? (Do not round intermediate calculations. Round your answer to 3 decimal places, e.g., 32.161.)

b-1 If Freya declares a one-for-four reverse stock split, how many shares are outstanding now? (Do not round intermediate calculations.)

b-2 What is the new par value per share? (Do not round intermediate calculations. Round your answer to 2 decimal places, e.g., 32.16.)

Stock Split

Stock Split refers to the splitting up of one common stock into more than 1 parts. It is generally done by the companies which see a substantial increase in per stock value without affecting the total market value of the company

Answer and Explanation:

Number of shares currently = 38000 / 0.50 = 76,000 shares

Question a-1)

One stock is split into two.

Hence Number of shares outstanding = 76000 x 2...

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Learn more about this topic:

What Are Stock Dividends & Stock Splits?

from Finance 101: Principles of Finance

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