Question

On July 1, Jones Corporation had the following capital structure:

Common Stock, par $1; 8,000,000 authorized shares, 110,000 issued and outstanding	$	110,000
Additional Paid-in Capital		92,000
Retained Earnings		172,000
Treasury Stock		None

Required:
Complete the following table based on two independent cases involving stock transactions: (Round "per share" answers to 2 decimal places.)

Case 1:	The board of directors declared and issued a 100 percent stock dividend when the stock price was $7 per share.
Case 2:	The board of directors voted a 2-for-1 stock split. The stock price prior to the split was $7 per share.

	Case 1 Case 2 Items Before Stock Transactions After 100% Stock Dividend After Stock Split Number of Shares Outstanding Par Per Share $1.00 Common Stock Account Additional Paid-in Capital 92,000 Retained Earnings 172,000 Total Stockholders' Equity

Answer 1

• All working forms part of the answer
• Case 1 Working

A	Outstanding no. of shares	110,000
B	Stock Dividend rate	100%
C = A x B	No. of shares issuable as Stock Dividend	110,000
D	Par Value per share	$                                   1
E = C x D	Stock Dividend distributed	$                      110,000
F = A + E	No. of shares after Stock Dividend	$                      220,000
G = F x D	Common Stock Value after Stock Dividend	$                      220,000
H	Retained earnings before Stock Dividend	$                      172,000
I = H - E	Retained earnings after Stock Dividend	$                        62,000

• Case 2 Working

Existing no. of shares = 110,000 shares

Shares split ratio = 2 : 1

No. of shares after Stock Split = 110000 x 2/1 = 220,000 shares

New Par Value = $ 1 x ½ = $ 0.50 per share

Rest all the values will remain same.

• Requirement, as asked

		Case 1	Case 2
Items	Before Stock Transactions	After 100% Stock Dividend	After Stock Split
		[See working]	[See working]
Number of Shares Outstanding	110,000	220,000	220,000
Par Per Share	$                     1.00	$                     1.00	$               0.50
Common Stock Account	$           110,000.00	$           220,000.00	$     110,000.00
Additional Paid-in Capital	$             92,000.00	$                        -	$       92,000.00
Retained Earnings	$           172,000.00	$             62,000.00	$     172,000.00
Total Stockholders' Equity	$           374,000.00	$           282,000.00	$     374,000.00