Problem 19-2

Existing no. of shares =

68750
10%=
6875
ans a-1: New Shares issued is 6875
Entry for Stock Dividend:
Retained Earnings
(6875*40)
Capital Surplus
(6875*39.6)
Common Stock
(6875*.40)

For Situation (a)

275000
272250
2750

ans a-2:
New Balances are:
Retained Earnings
Capital Surplus
Common Stock(Given)

543120
647250
30250
1220620

Existing no. of shares =

68750
20%=
13750
ans b-1: New Shares issued is 13750
Entry for Stock Dividend:
Retained Earnings
(13750*40)
Capital Surplus
(13750*39.6)
Common Stock
(13750*.40)

For Situation (b)

550000
544500
5500

ans b-2:
New Balances are:
Retained Earnings
Capital Surplus
Common Stock

268120
919500
33000
1220620

Problem 19-4
Existing No. of Shares=
Existing Share Price=
Existing Market Cap=

500000
70
35000000

Stock Split Ratio is 4 shares for every 3 shares

New No. of Shares=
666666.67
New/Existing Market Cap=
35000000.00 Note: Stock Split has no impact on Market Cap
New Share Price=
52.50
ans a- The New Share Price is $52.50
Stock Dividend=15%
New Shares issued=
Total No. of Shares after issue=
New/Existing Market Cap=
New Share Price=

75000
575000
35000000.00 Note: Stock Dividend has no impact on Market Ca
60.87

ans b- The New Share Price is $60.87

Stock Dividend=41.5%
New Shares issued=
Total No. of Shares after issue=
New/Existing Market Cap=
New Share Price=

207500
707500
35000000.00 Note: Stock Dividend/Stock Split has no impact on
49.47
Note: If a corporation issues less than 25 percent
outstanding shares to shareholders, the transacti
ans c- The New Share Price is $49.47
for a greater proportion of the previously outstan
stock split.

Reverse Stock Split Ratio is 4 shares for every 7 shares, i.e., every 7 shares are converted into 4 share
New No. of Shares=
285714.29
New/Existing Market Cap=
35000000.00 Note: Reverse Stock Split has no impact on Marke
New Share Price=
122.50
ans d- The New Share Price is $122.50
ans eParts
a
b
c
d

New Shares
Outstanding
666667
575000
707500
285714

o impact on Market Cap

as no impact on Market Cap

tock Split has no impact on Market Cap

ssues less than 25 percent of the total amount of the number of previously
shareholders, the transaction is accounted for as a stock dividend. If the issuance is
n of the previously outstanding shares, the transaction is instead accounted for as a

are converted into 4 shares

plit has no impact on Market Cap

Problem 19-5
Existing Market Cap=
No. of shares=
Existing Share Price=
Dividend Declared
Current/Cum Dividend Stock Price=
Ex-Dividend Stock Price=

505200
6000
84.20
1.5
84.20
82.70

ans a- The Current Stock Price is $84.20

ans b- The Stock Price tomorrow will be Ex-Dividend, i.e., $82.70
ans C- The Ex-Dividend date balances will be as under:
Cash
(45200-6000*1.5)
Fixed Assets

36200
460000
496200

Equity
(82.7*6000) or Balancing Figure

496200

496200

Problem 19-6
Total Market Cap=
No. of Shares=
Price Per Share=
Share Repurchase Amount=
No. of Shares Repurchased=

404200
10000
40.42
19000
470.06 Assuming Shares repurchased at market price itself.

ans a- The no. of shares that will be outstanding after the repurchase=
ans b- The price after the repurchase shall be same as earlier, i.e., $40.42
Proof:
Market Cap now=404200-19000=
385200
No. of shares o/s=
9529.94
Share Price=
40.42

9529.94

rket price itself.

FLYBUCKER CORPORATION
Value to be spent=
No.of shares=
Price per share=
Market Cap=
Current EPS=
Total Earnings=
Current P/E Ratio=
Shares Repurchased=
Revised no. of shares=

17000
2500
40
100000
1.6
4000
25
425
2075

ans aParticulars
Price Per Share
Shareholder Wealth

Alt1- Cash
Dividend
33.20
83000

Alt2-Share
Repurchase
40 Same logic as in P19-6
83000

Alt1- Cash
Dividend
1.60
20.75

Alt2-Share
Repurchase
1.93
20.75

ans bParticulars
EPS
PE ratio

ame logic as in P19-6