Question

Jones Co. had 50,000 shares of $5 par value common stock outstanding at January 1. On August 1, Jones declared a 5% stock dividend followed by a two-for-one stock split on September 1. What amount should Jones report as common shares outstanding at December 31?

Answer 1

The 105,000 shares should Jones report as common shares outstanding at December 31

Step-by-step explanation:

The computation of the common shares outstanding is shown below:

= (Number of shares + Number of shares × dividend rate) × stock split ratio

= (50,000 shares + 50,000 shares × 5%) × 2

= (50,000 shares + 2,500 shares) × 2

= 52,500 shares × 2

= 105,000 shares

As we have to compute only outstanding shares so no par value would be considered in the computation part. Hence, it is ignored