Question

On June 13, the board of directors of Siewert Inc. declared a 2-for-1 stock split on its 40 million, $1 par, common shares, to be distributed on July 1. The market price of Siewert common stock was $15 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

Answer:

Siewert Inc.

a) Journal Entry:

A memo entry to show that there is a 2-for-1 split only with new par value of $0.50 for 80 million shares.

b) The par value after the split = $0.50

Explanation:

a) Data and Calculations:

Common Stock = 40 million shares

Par value = $1

Declared stock split = 2-for-1

Market price of stock = $15 on June 13

New Common Stock = 80 million shares (40 million * 2)

New Par Value of Stock = $0.50 ($1/2)

b) Siewert Inc. does not record any journal entry for the stock split.  Instead, it prepares a memo entry in its journal that indicates the nature of the stock split (2-for-1) and indicates the new par value to be $0.50. The company's balance sheet will reflect the new par value and the new number of shares authorized, issued, and outstanding after the stock split, which has been multiplied by 2 as 80 million shares.