Question

Kinmi Financial Corporation is the parent company of Kinmi Bank. The company’s stock split was announced in the following wire: LOS ANGELES (BUSINESS WIRE) Jan. 20—Kinmi Financial Corporation (Nasdaq), announced that the Board of Directors has approved a two-for-one stock split, to be effected in the form of a 100 percent common stock dividend. Kinmi Financial Corporation stockholders of record at the close of business on January 31 will receive one additional share of common stock for every share of common stock then held. Distribution of additional shares issued as a result of the split is expected to occur on or about February 15. At the time of the stock split, 28.5 million shares of common stock, $.001 par per share, were outstanding. Required: 1. Prepare the journal entry, if any, that Kinmi recorded at the time of the stock split. 3. If Kinmi's stock price had been $40 at the time of the split, what would be its approximate value after the split (other things equal)?

Answer 1

Solution 1:

Journal Entries - Kinmi Financial Corporation
Date	Particulars	Debit	Credit
20-Jan	Stock dividend Dr (28500000*100%*$0.001)	$285,000.00
	To Common stock dividend distributable		$285,000.00
	(To record stock dividend declared)
15-Feb	Common stock dividend distributable Dr	$285,000.00
	To Common stock		$285,000.00
	(To record issue of stock dividend)

Solution 3:

If Kinmi's stock price had been $40 at the time of the split, approximate value after the split = $40/2 = $20 per share