The owners' equity accounts for Mars International are shown here:Common stock ($.50 par value)Capital surplusRetained earningsTotal owner's equityPlease show the equity accounts will change if:a. The company declares a 5-for-1 stock split. How many shares are outstanding now? What is thenew par value per share?b. The company declares a 1-for-4 reverse stock split.$20,000210,000587,300$817,300c. The balance sheet for Mars International is shown below in Market value terms. There are 12,000shares of stock outstanding.Market Value Balance SheetEquity $817,300Cash$ 99,660Fixed assets 717,640Total$817,300Total $817,300The company has declared a dividend of $1.45 per share. The stock goes ex dividend tomorrow.Ignoring any tax effects, what is the stock selling for today? What will it sell for tomorrow? Whatwill the balance sheet look like after the dividends are paid?d. suppose the company has announced it is going to repurchase $17,400 worth of stock. What effectwill this transaction have on the equity of the firm? How many shares will be outstanding? What willthe price per share be after the repurchase? Ignoring tax effects, show how the share repurchaseseffectively the same as a cash dividend.

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EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter15: Dividend Policy

Section: Chapter Questions

Problem 11P

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Ratio Analysis MJO Inc. has the following stockholders equity section of the balance sheet: On the balance sheet date, MJOs stock was selling for S25 per share. Required: Assuming MJOs dividend yield is 1%, what are the dividends per common share? Assuming MJOs dividend yield is 1% and its dividend payout is 20%, what is MJOs net income?
Alert Companys shareholders equity prior to any of the following events is as follows: The company is considering the following alternative items: 1. An 8% stock dividend on the common stock when it is selling for 30 per share. 2. A 30% stock dividend on the common stock when it is selling for 32 per share. 3. A special stock dividend to common shareholders consisting of 1 share of preferred stock for every 100 shares of common stock. The preferred stock and common stock are selling for 123 and 31 per share, respectively. 4. A 2-for-1 stock split on the common stock, reducing the par value to 5 per share (assume the same date for declaration and issuance). The market price is 30 per share on the common stock. 5. A property dividend to common shareholders consisting of 100 bonds issued by West Company. These bonds are carried on the Alert Company books as an available-for sale investment at a fair value of 48,000 (which is also its cost); it has a current value of 54,000. 6. A cash dividend, consisting of a normal dividend and a liquidating dividend, on both the preferred and the common stock. The 10% preferred dividend includes a 2% liquidating dividend, and the 2.30 per share common dividend includes a 0.30 per share liquidating dividend (separate liquidating dividend contra accounts should be used). Required: For each of the preceding alternative items: 1. Record (a) the journal entry at the date of declaration and (b) the journal entry at the date of issuance. 2. Compute the balances in the shareholders equity accounts immediately after the issuance (any gains or losses are to be reflected in the retained earnings balance; ignore income taxes).
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