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, 74,000 shares issued and outstanding $ 740,000 Paid-in capital in excess of par value, common stock 320,000 Retained earnings 720,000 Total stockholders’ equity $ 1,780,000 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.
1. Updated Stockholder's Equity Section
|Common stock-$3.3333 par value, 360,000 shares authorised, 222,000 shares issued and outstanding||$740,000|
|Paid in capital in excess of par value, common stock||$320,000|
|Total Stockholder's Equity||$1,780,000|
Sharper has done a 4-for-1 stock split. When a stock splt is done, it does not generate any funds. Only the number of shares outstanding will increase decreasing the par value of a share.
2. No of shares outstanding after the split
Sharper has done a 4-for-1 stock split.
No of shares before the split = 74,000
Ratio of split is 3-for-1
Therefore no of shares after the split = 74,000 * 3
= 222,000 shares of $3.3333 each
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