Effect of Stock Split Gino's Restaurant Corporation wholesales ovens and ranges to restaurants throughout the Midwest....

Effect of Stock Split

Gino's Restaurant Corporation wholesales ovens and ranges to restaurants throughout the Midwest. Gino's Restaurant Corporation, which had 18,000 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 $144 per share before the stock split, what would be an approximate market price per share after the split?
$ per share

A corporation, which had 37,000 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 $123 per share before the stock split, what would be an approximate market price per share after the split?
$ per share

(c) Is a journal entry required for a stock split?

Solutions

Expert Solution

Part 1(a) = Calculation of Total Number of shares after stock Split.

Total outstanding shares = 18000

Stock Split ratio = 3 shares for 1 Shares

Meaning = For 1 share of Gino's restaurent corporation will issue 3 shares.

Total Shares after stock split = 18000*3 = 54000 Shares

Part 1(b) = Total Market Price Before Stock Split = $144 Per share

Total Market Value of corporation = ($144 * 18000) = $2592000

New Market Price After stock split

Particulars
Total Market Value (A)	$2592000
Total Shares after stock split (B)	54000
Market Price per share after stock split (A/B)	$48

Part 2(a) = Calculation of total Number of shares after stock split = 37000* 3 = 111000 Shares

Part 2(b) = Total Market value before stock split = ($123*37000) = $4551000

Market Price per share after stock split

Particulars
Total Market Value (A)	$4551000
Total Shares after stock split (B)	111000
Market Price Per share after stock split (A/B)	$41

Part 2(c) = No Journal Entry required for stock split. But only a memorandum is written in general journal and General ledger account.

Stock split does not effect in amount of total value of stock. Hence journal entry is not required for stock split.

Hence only a memorandum is required for informatory Purpose.

ekkarill92 answered 10 months ago

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