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Problem 10-08 A firm has the following balance sheet: Assets Liabilities and Equity Cash $ 20,000 Accounts payable $ 20,000 Accounts receivable 152,000 Long-term debt

Problem 10-08

A firm has the following balance sheet:

Assets Liabilities and Equity
Cash $ 20,000 Accounts payable $ 20,000
Accounts receivable 152,000 Long-term debt 111,000
Inventory 92,000 Common stock ($6 par; 24,000
4,000 shares outstanding)
Plant and equipment 190,000 Additional paid-in capital 157,000
Retained earnings 142,000
$454,000 $454,000

a) Construct a new balance sheet showing the impact of a three-for-one split. If the current market price of the stock is $50, 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: $__________

b) 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: $__________

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