Question

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?

Answer 1

1. journal entry in case of 8% stock dividend-

	particulars	debit	credit
at the time of declaration	retained earnings(25000*8%*26)	52000
	stock dividend distr, (25000*8%*6)		12000
	paid in capital in excess of par		40000
at the time of distributiom	stock dividend distr.	12000
	common stock		12000

2. journal entry in case of 40% stock dividend-

	particulars	debit	credit
at the time of declaration	retained earnings (25000*40%*6)	60000
	stock dividend distributed		60000
at the time of distribution	stock div. distr.	60000
	common stock		60000

3. the TOTAL par value of the shares outstanding is not effected by the stock split. therefore, no journal entry is required for the stock split.

4. balance of common stock accountbefore stock split = 25000*6 = 150000

5.no. of shares of common stock after stock split = 25000*3 = 75000

6. par value per share after the stock split = 6/3 = 2

7. balance of common stock after stock split = 75000*2 = 150000

8. no, there is no change in the balance of common stock after stock split.