Question

In: Accounting

A corporation, which had 33,300 shares of common stock outstanding, declared a 3-for-1 stock split. a....

A corporation, which had 33,300 shares of common stock outstanding, declared a 3-for-1 stock split.

a. What will be the number of shares outstanding after the split?
shares

b. If the common stock had a market price of $78 per share before the stock split, what would be an approximate market price per share after the split?
$ per share

c. Journalize the entry to record the stock split. If no entry is required, type "No Entry" and leave the amount boxes blank.

Expert Solution

a) The number of shares outstanding after the split is calculated as follows:

	Shares
Number of common stock outstanding	33,300
Stock split ratio	3 for 1

The number of shares outstanding after the split = Number of common stock outstanding * Stock split ratio

= 33,300 Shares * 3/1

= 99,900 Shares

The number of shares outstanding after the split is 99,900 Shares

b) The approximate market price per share after the split is calculated as follows:

The approximate market price per share after the split = $78 * 1/3

= $26 Per Share

The approximate market price per share after the split is $26 Per Share

c) Journal entry to record the stock split is as follows:

Note:This journal entry is memorandum entry

Date	Explanation
c)	Memorandum : Stock Split of 3-for-1 number of common shares outstanding increased from 33,300 shares to 99,900 shares so the par value is reduced. Additional shares distributed 66,600 shares (99,900 Shares - 33,300 Shares).

Stock split will change the number of shares and the par value, but it does not affect total value of common stock and stockholder's equity.

ekkarill92 answered 2 years ago

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