Question

The current market price of the stock is $70 per share. Merriam has 900,000 shares authorized...

The current market price of the stock is $70 per share. Merriam has 900,000 shares authorized and 100,000 shares issued and outstanding of $2 par value common stock. On December 1st, 2018, the company declared and issued a 2-for-1 stock split.

1. How did the company record the stock split in the accounting records on December 1st?

2. After the stock split, determine the new value for each of the following items. a. Market Price/Share b. Impact on Stockholder’s Equity (increase, decrease, no impact)

please show the work clearly

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Answer #1

Question

1.How did the company record the stock split in the accounting records on December 1st?

Answer : There is not need to do the journal entry related to debit or credit any account as there is no change in the total dollar ammount for the par value and other components of paid up capital and stock holder' equity not changed with a stock split.

2.After the stock split, determine the new value for each of the following items. a. Market Price/Share

Answer :as current outstanding common stock is 100000 after the split of 2 for 1stock split the outstanding common stock willl be 200000

and market price will = $70 / 2 = $ 35

b. Impact on Stockholder’s Equity (increase, decrease, no impact)

Answer :Ther is no change in the stock holder equity as the no of oustanding shares will be changed there is no change in dollar value of shareholder equity

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