Question

In: Accounting

The Smith Company currently has 25,000 shares of common stock outstanding. The stock has a par...

The Smith Company currently has 25,000 shares of common stock outstanding. The stock has a par value of $6 per share and a market value of $26 per share – in other words, the price of the stock if you want to buy it is $26 per share.

Please make the journal entry required if the company gives the stockholders an 8% stock dividend.
Please make the journal entry required if the company gives the stockholders a 40% stock dividend instead of an 8% stock dividend.
Suppose that instead of giving the stockholders a stock dividend the company decides to do a 3-for-1 stock split.
Is a journal entry needed for a stock split?
What is the balance of the Common Stock account before the stock split?
How many shares of common stock would there be after the stock split?
What would the par value per share be after the stock split?
What is the balance of the Common Stock account after the stock split?
Did the stock split change the balance of the Common stock account?

Solutions

Expert Solution

Account Titles and Explanation Debit Credit
Retained Earnings (8% x 25000 x $26) 52000
Common Stock (8% x 25000 x $6) 12000
Paid-in capital in excess of par-common 40000
(To record distribution of stock dividend)
Account Titles and Explanation Debit Credit
Retained Earnings (40% x 25000 x $6) 60000
Common Stock 60000
(To record distribution of stock dividend)

In case of a small stock dividend (less than 20 to 25%), the market value of the shares being issued is transferred from the retained earnings while for a large stock dividend, the par value of the shares being issued is transferred from the retained earnings to the paid-in capital section of stockholders' equity.

No, a journal entry is not needed for a stock split. Only a memo entry is recorded for stock split reducing the par value of the common stock and increasing the number of common shares outstanding.

Balance of common stock account before the stock split = 25000 x $6 = $150000

Number of shares of common stock after the stock split = 25000 x 3 = 75000

Par value per share after the stock split = $6/3 = $2

Balance of common stock account after the stock split = 75000 x $2 = $150000

No, the stock split did not change the balance of the common stock account.

ekkarill92 answered 1 year ago
Next > < Previous

Related Solutions

The Smith Company currently has 25,000 shares of common stock outstanding. The stock has a par...
The Smith Company currently has 25,000 shares of common stock outstanding. The stock has a par value of $6 per share and a market value of $26 per share – in other words, the price of the stock if you want to buy it is $26 per share. Please make the journal entry required if the company gives the stockholders an 8% stock dividend. Please make the journal entry required if the company gives the stockholders a 40% stock dividend...
Entries for Stock Dividends Madrid Corporation has 25,000 shares of $80 par common stock outstanding. On...
Entries for Stock Dividends Madrid Corporation has 25,000 shares of $80 par common stock outstanding. On August 2, Madrid Corporation declared a 5% stock dividend to be issued October 8 to stockholders of record on September 15. The market price of the stock was $110 per share on August 2. Journalize the entries required on August 2, September 15, and October 8. If an amount box does not require an entry, leave it blank. If no entry is required, select...
Baker Company has common and preferred stock outstanding as follows. Common stock: 100,000 shares, $30 par...
Baker Company has common and preferred stock outstanding as follows. Common stock: 100,000 shares, $30 par value 8 percent preferred stock: 10,000 shares, $100 par value Dividends on preferred stock have not been paid for the last three years (in addition to the current year). a. If the company pays a total of $120,000 in dividends, how much will the common stockholders receive per share if the preferred stock is not cumulative? (Round your answer to 2 decimal places.) b....
A company has 4.3 million shares of common stock outstanding and 85,000 bonds outstanding, par value...
A company has 4.3 million shares of common stock outstanding and 85,000 bonds outstanding, par value of $1,000 each. Each bond has a 6.8 percent annual coupon rate and the bonds have 23 years to maturity and is now selling at $789.23. (Based on the current price, its YTM is 9%) Coupon is paid annually. The common stock currently sells for $58.00 per share and has a beta of 0.90.  The market risk premium is 7 percent and Treasury bills are...
The Wall Company has 142,500 shares of common stock outstanding that are currently selling at $30.75....
The Wall Company has 142,500 shares of common stock outstanding that are currently selling at $30.75. It has 4,310 bonds outstanding that won't mature for 20 years. They were issued at a par value of $1,000 paying a coupon rate of 6%. Comparable bonds now yield 9%. Wall's $100 par value preferred stock was issued at 8% and is now yielding 12%; 8,500 shares are outstanding. Assume that the coupon payments are semi-annual. Develop Wall's market value based capital structure....
Tere company has 4.3 million shares of common stock outstanding and 85,000 bonds outstanding, par value...
Tere company has 4.3 million shares of common stock outstanding and 85,000 bonds outstanding, par value of $1,000 each. Each bond has a 6.8 percent annual coupon rate and the bonds have 23 years to maturity and is now selling at $789.23. (Based on the current price, its YTM is 9%) Coupon is paid annually. The common stock currently sells for $58.00 per share and has a beta of 0.90. The market risk premium is 7 percent and Treasury bills...
A company has 10,000 shares of $10 par common stock outstanding. Prepare entries to record the...
A company has 10,000 shares of $10 par common stock outstanding. Prepare entries to record the following: a. Purchased 1,000 shares of treasury stock at $12. The treasury stock is accounted for by the cost method. There were no previous purchases of treasury shares. If an amount box does not require an entry, leave it blank. b. Sold 500 shares of treasury stock at $15. If an amount box does not require an entry, leave it blank. c. Purchased equipment...
Casio Company has 30,000 shares of $1 par common stock issued and outstanding. The company also...
Casio Company has 30,000 shares of $1 par common stock issued and outstanding. The company also has 5,000 shares of $100 par 5% cumulative preferred stock outstanding. The company did not pay the preferred dividends in 2017, 2018 and 2019. On December 1, 2020, the company’s board of directors declared that $200,000 will be paid as dividend on January 17, 2021. What amount of dividends would common stockholders earn? * a) $200,000 b) $150,000 c) $125,000 d) $100,000
XYZ Company has currently $2 million shares of common stock outstanding, and the selling price of...
XYZ Company has currently $2 million shares of common stock outstanding, and the selling price of each stock is $25. They want to extend $3 Million through bond issuance at 10% interest rate. Financial analyst estimated $2 Million EBIT. The marginal tax rate is 35%. a) What would be the earning per share?
Slow Food has 400,000 shares of common stock outstanding. The common stock currently sells for $70...
Slow Food has 400,000 shares of common stock outstanding. The common stock currently sells for $70 per share. It is expected that common stock will pay $3 dividend next year and its growth rate is 4 percent. Fresh Food Company has 550,000 shares; 4% preferred stock outstanding. Preferred stock is currently sold at $95 per share and flotation (selling) cost is $2. Fresh Food has 160,000 of 10 percent annual interest bonds outstanding, price is 95% of the par value...
ADVERTISEMENT
Subjects
ADVERTISEMENT
Latest Questions
ADVERTISEMENT