Answer and Explanation:
a. The journal entry is not required for the stock split. But the memorandum is needed that represents the par value changed and the number of shares is also increased
Before stock split
5,000,000 shares at $10 par value
After stock split
10,000,000 shares at $5 par value
b. The journal entries are shown below:
1. Retained earnings Dr $50,000,000
To Common stock dividend distributable $50,000,000
(Being the stock dividend declared)
For recording this we debited the retained earning as it decreased it and credited the common stock dividend distributable
2. Common stock dividend distributable $50,000,000
To common stock $50,000,000
(Being the stock dividend distribution is recorded)
For recording this we debited the common stock dividend distributable and credited the common stock as it increased the stockholder equity
c. The stock dividend and splits contain the same function
As we know that
Stock split increased the outstanding number of shares and at the same time it decreased the par value of the share
While on the other hand stock dividend increased the outstanding number of shares and at the same time it does not have any impact on the par value of the share
Moreover, it also increased the marketability of the stock
In case when the stock dividend issued in excess of 20 to 25% of outstanding shares so we do not called stock dividend but it effected as a split up as in the form of a dividend
