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Week 2 Individual Assignment

Week 2 Individual Assignment - E15-13(LO 8(Stock Split and...

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E15-13 selling at $120 per share. The directors wish to reduce the share price and increase share volume prior to a new issue. The per share par value is $10; book value is $70 per share. Nine million shares are issued and outstanding. Instructions Prepare the necessary journal entries assuming the following. 1 The board votes a 2-for-1 stock split. 2 The board votes a 100% stock dividend 3 Briefly discuss the accounting and securities market differences between these two methods of increasing the number of shares outstanding. SOLUTIONS 1 No entry is made, but a memorandum is made inditcating the number of shares increased t and that the par value is now $5 instead of $10 2 Retained Earnings ($10 X 9,000,000) 90,000,000 Common Stock Dividend Distributable 90,000,000 Common Stock Dividend Distributable 90,000,000 Common Stock 90,000,000 3 Stock dividends and splits provide the same purpose with observing to the securities marke procedures allow the board of directors to amplify the extent of shares and condense share preferred “trading range.” For accounting purposes the 20%–25% rule logically views huge stock dividends as substa this case, it is essential to exploit par value with a stock dividend because the amount of sh the par value remains alike. Earnings are capitalized for merely routine explanations.
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