EXERCISE 15-13 - the securities markets Both techniques...

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EXERCISE 15-13 (10–15 minutes) (a) No entry—simply a memorandum note indicating the number of shares has increased to 10 million and par value has been reduced from $10 to $5 per share. (b) Retained Earnings ($10 X 5,000,000). ................ 50,000,000 Common Stock Dividend Distributable. ..... 50,000,000 Common Stock Dividend Distributable. ........... 50,000,000 Common Stock. .................................................. 50,000,000 (c) Stock dividends and splits serve the same function with regard to
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Unformatted text preview: the securities markets. Both techniques allow the board of directors to increase the quantity of shares and reduce share prices into a desired “trading range.” For accounting purposes the 20%–25% rule reasonably views large stock dividends as substantive stock splits. In this case, it is necessary to capitalize par value with a stock dividend because the number of shares is increased and the par value remains the same. Earnings are capitalized for purely procedural reasons....
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This note was uploaded on 01/31/2011 for the course ACCT 302 taught by Professor Leee during the Spring '10 term at Grand Rapids Community College.

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