Question

On june 13, the board of directors of siewert inc. declared a 2-for-1 stock split on its 80 million, $2 par, common shares, to be distributed on july 1. the market price of siewert common stock was $29 on june 13. prepare the journal entry to record 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

prepare the journal entry to record the stock split if it is not to be effected in the form of a stock dividend.

• even though a typical journal entry is not needed to record a stock split (debit & credit), you must still prepare a memorandum entry that will also be included in the footnotes of the financial statements. This memo entry has to state that the stock split happened, and the total number of outstanding shares doubled from 80 million to 160 million, and that par value decreased from $2 to $1. There is no need to debit or credit any account because the account balances have not changed. The memo entry must be entered into the general journal and the general ledger account.

what is the par per share after the split?

• $1

Answer 2

No journal entry is required

The par per share after the split $1

Step-by-step explanation:

If a stock split is not to be effected in the form of a stock dividend, no entry is recorded. The balance in the common stock account remains the same.

The par value before stock split was $2, board of directors declared a 2 for 1 split so the par value will be reduced by half.

We will calculate the par value after stock split by

= $2 / 2

= $1