Complete Question:
On June 30, Sharper Corporation's stockholders' equity section of its balance sheet appears as follows before any stock dividend or split. Sharper declares and immediately distributes a 50% stock dividend. Common stock-$10 par value, 120,000 shares authorized, 72,000 shares issued and outstanding $ 720,000
Paid-in capital in excess of par value, common stock 310,000
Retained earnings 715,000
Total stockholders' equity $1,745,000
Assume that instead of distributing a stock dividend, Sharper did a 3-for-1 stock split. Required: (1) Prepare the updated stockholders' equity section after the split. (2) Compute the number of shares outstanding after the split. Complete this question by entering your answers in the tabs below. Required 1 Required 2 Prepare the updated stockholders' equity section after the split.
Answer:
Sharper Corporation
1. SHARPER CORPORATION
Stockholders' Equity Section of the Balance Sheet June 30
Total stockholders' equity
Common stock-$3.33 par value, 360,000 shares authorized,
216,000 shares issued and outstanding $ 720,000
Paid-in capital in excess of par value, common stock 310,000
Retained earnings 715,000
Total stockholders' equity $1,745,000
2. The number of shares outstanding after the split is:
= 216,000 shares.
Explanation:
a) Data and Calculations:
Common stock-$10 par value, 120,000 shares authorized,
72,000 shares issued and outstanding $ 720,000
Paid-in capital in excess of par value, common stock 310,000
Retained earnings 715,000
Total stockholders' equity $1,745,000
Authorized shares = 360,000 (120,000 * 3)
Outstanding shares = 216,000 (72,000 * 3)
Common stock par value = $3.333 ($10/3)
b) A 3-for-1 stock split means that shareholders will now have 3 shares for each share that they previously held. Therefore, the outstanding and authorized shares will be multiplied by 3 while the stock price is divided by 3 to arrive at their values after the split.
