Question

On June 13, the board of directors of Siewert Inc. declared a 2-for-1 stock split on its 60 million, $2 par, common shares, to be distributed on July 1. The market price of Siewert common stock was $17 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

No journal entry for stock split

Par value of $1

Step-by-step explanation:

For two reasons,there would not be a journal entry to record stock split,the reasons are enumerated below:

The stock split does not increase the amount of equity,the shareholders has, because it a mere redenomination of shares,where the number of shares is increased and the share price reduced to ensure share trading liquidity.

Secondly,the shareholders get more shares without paying any consideration,hence no entry is required.

A 2 for 1 stock split means that two shares at the price of one share previously,the share price after stock split is computed thus:

one share was $2 par value,$2/2=$1,each share now has a par value of $1