Question

On June 13, the board of directors of Siewert Inc. declared a 2-for-1 stock split on its 50 million, $10 par, common shares, to be distributed on July 1. The market price of Siewert common stock was $26 on June 13. Prepare a journal entry that summarizes the declaration and distribution of the stock split if it is not to be effected in the form of a stock dividend. What is the par per share after the split?

Answer 1

The journal entry to summarize the declaration and distribution of the stock split is as follows: Debit Retained Earnings for $25 million and credit Common Stock Distributable and Common Stock for $250 million each. The par value per share after the split is $5.

Step-by-step explanation:

The journal entry to summarize the declaration and distribution of the stock split would be as follows:

Date: June 13

Account Titles:

1. Retained Earnings (2.5 million x $10)
2. Common Stock Distributable ($10 x 25 million)
3. Common Stock ($10 x 25 million)

Debit:

1. Retained Earnings - $25 million

Credit:

1. Common Stock Distributable - $250 million
2. Common Stock - $250 million

The par value per share after the split would be $5 ($10 divided by 2).

Answer 2

No Journal Entry is required

After split per value of share = $5 per share

Step-by-step explanation:

No Journal Entry is required as stock split is not in the the form of stock divined and the number of common stock will change, not the value.

The calculation of par per share after the split is shown below:-

Before the split the total Number of share = 50 million shares

The ratio after the split = 2 : 1

Total number for the par value 50 million × 10 = 500 million before and stock split.

After split the total number of share = 50 million × 2

= 100 million

After split per value of share = 10/2

= $5 per share