For the company in Problem 2, show how the equity accounts will change if:

a. The company declares a 4-for-1 stock split. How many shares are outstanding now? What is the new par value per share?

b. The company declares a 1-for-5 reverse stock split. How many shares are outstanding now? What is the new par value per share?

Data from Problem 2

The owners’ equity accounts for Southern Lights International are shown here:

Common stock ($1 par value)............ $ 22,000
Capital surplus ........................................95,000
Retained earnings ................................632,800
Total owners’ equity ..........................$749,800