Problem 10-08

A firm has the following balance sheet:

Assets				Liabilities and Equity
Cash	$	10,000		Accounts payable	$	10,000
Accounts receivable		158,000		Long-term debt		107,000
Inventory		88,000		Common stock ($8 par;		32,000
				4,000 shares outstanding)
Plant and equipment		200,000		Additional paid-in capital		159,000
				Retained earnings		148,000
		$456,000				$456,000

1. Construct a new balance sheet showing the impact of a two-for-one split. If the current market price of the stock is $55, what is the price after the split? Round the par value and the market price after the split to the nearest cent, the number of shares outstanding to the nearest whole number, and the other answers to the nearest dollar.

   Assets				Liabilities and Equity
   Cash		$		Accounts payable		$
   Accounts receivable		$		Long-term debt		$
   Inventory		$		Common stock ($ par;		$
   				shares outstanding)
   Plant and equipment		$		Additional paid-in capital		$
   				Retained earnings		$
   		$				$

   Price of the common stock after the split: $

2. Construct a new balance sheet showing the impact of a 10 percent stock dividend. After the stock dividend, what is the new price of the common stock? Use the original balance sheet from the problem statement. Round the par value and the market price after the stock dividend to the nearest cent, the number of shares outstanding to the nearest whole number, and the other answers to the nearest dollar.

   Assets				Liabilities and Equity
   Cash		$		Accounts payable		$
   Accounts receivable		$		Long-term debt		$
   Inventory		$		Common stock ($ par;		$
   				shares outstanding)
   Plant and equipment		$		Additional paid-in capital		$
   				Retained earnings		$
   		$				$

   Price of the common stock after the stock dividend: $