ch.18 solution

# ch.18 solution - 2 a The shares outstanding increases by 10...

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2. a. The shares outstanding increases by 10 percent, so: New shares outstanding = 20,000(1.10) = 22,000 New shares issued = 2,000 Since the par value of the new shares is \$1, the capital surplus per share is \$24. The total capital surplus is therefore: Capital surplus on new shares = 2,000(\$24) = \$48,000 Common stock (\$1 par value) \$ 22,000 Capital surplus 243,000 Retained earnings 487,400 \$752,400

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b. The shares outstanding increases by 25 percent, so: New shares outstanding = 20,000(1.25) = 25,000 New shares issued = 5,000 Since the par value of the new shares is \$1, the capital surplus per share is \$24. The total capital surplus is therefore: Capital surplus on new shares = 5,000(\$24) = \$120,000 Common stock (\$1 par value) \$ 25,000 Capital surplus 315,000 Retained earnings 412,400 \$752,400 3. a. To find the new shares outstanding, we multiply the current shares outstanding times the ratio of new shares to old shares, so: New shares outstanding = 20,000(4/1) = 80,000 The equity accounts are unchanged except the par value of the stock is changed by the ratio of
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## This note was uploaded on 02/23/2010 for the course FIN 81341 taught by Professor Yang during the Spring '10 term at CSU San Bernardino.

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ch.18 solution - 2 a The shares outstanding increases by 10...

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