Log out Go to App
Go to App

Learning Materials

Features

Discover

Chapter 13: Q33E_2 (page 716)

Determining the effect of stock dividends, stock splits, and treasury stock transactions

Many types of transactions may affect stockholders’ equity. Identify the effects of the following transactions on total stockholders’ equity. Each transaction is independent.

b. A 2-for-1 stock split. Prior to the split, 66,000 shares of $5 par value common stock were outstanding

Short Answer

Expert verified

The post- split shares will be 132,000 shares and post- split price will be $2.5 and thus it will make no changes in the amount of stock and shareholder’s equity overall.

Step by step solution

01

Basic Introduction

NumberofSharesAfterStockSplit=NumberofShares×StockSplit=66,000×2=132,000

StockPriceAfterStockSplit=PriceBeforeStockSplitStockSplit=$52=$2.5

02

The effect of stock dividends, stock splits, and treasury stock transactions

The stock split will not make any effect on the total amount of Shareholder’s equityas it will not make any changes in the total amount of any sub- heads included under it.

Unlock Step-by-Step Solutions & Ace Your Exams!

  • Full Textbook Solutions

    Get detailed explanations and key concepts

  • Unlimited Al creation

    Al flashcards, explanations, exams and more...

  • Ads-free access

    To over 500 millions flashcards

  • Money-back guarantee

    We refund you if you fail your exam.

Start your free trial

Over 30 million students worldwide already upgrade their learning with Vaia!

One App. One Place for Learning.

All the tools & learning materials you need for study success - in one app.

Get started for free

Most popular questions from this chapter

Determining paid-in capital for a corporation

Aruba Corporation recently organized. The company issued common stock to an inventor in exchange for a patent with a market value of \(57,000. In addition, Aruba received cash for 6,000 shares of its \)10 par preferred stock at par value and 6,500 shares of its no-par common stock at $20 per share. Without making journal entries, determine the total paid-in capital created by these transactions.

Analyzing the effect of prior-period adjustments

Taylor Corporation discovered in 2019 that it had incorrectly recorded in 2018 a cash payment of \(70,000 for utilities expense. The correct amount of the utilities expense was \)35,000.

Requirements

2. How should this error be reported in the 2019 financial statements?

Question - Describing corporation characteristics

Due to recent beef recalls, Southwest Steakhouse is considering incorporating. Bob, the owner, wants to protect his personal assets in the event the restaurant is sued.

Requirements

1. Which advantage of incorporating is most applicable? What are other advantages of organizing as a corporate entity?

Identifying advantages and disadvantages of a corporation

Following is a list of advantages and disadvantages of the corporate form of business. Identify each quality as either an advantage or a disadvantage.

f. Entity can raise more money than a partnership or sole proprietorship.

Question: Journalizing issuance of stock—at par and at a premium

Colorado Corporation has two classes of stock: common, \(3 par value; and preferred, \)30 par value.

Requirements

1. Journalize Colorado’s issuance of 4,500 shares of common stock for $6 per share.
See all solutions

Recommended explanations on Business Studies Textbooks

Human Resources

Read Explanation

Business Development

Read Explanation

Introduction to Business

Read Explanation

Operational Management

Read Explanation

Strategic Direction

Read Explanation

Organizational Communication

Read Explanation
View all explanations

What do you think about this solution?

We value your feedback to improve our textbook solutions.

Study anywhere. Anytime. Across all devices.

Sign-up for free