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 (Nasdag), 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, 26.5 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 $38 at the time of the split, what would be its approximate value after the split (other things equal)?

Answer 1

Answer :
1. Preparation of journal entry at the time of stock split
Date	Account Titles and Explanation	Debit (in $)	Credit (in $)
Jan-20	Paid in Capital in Excess of par	$26,500
	Common Stock		$26,500
	(To record the 26.5 million additional shares were given to the common shareholders towards stock dividend)
Common stock = 26.5 million shares * $0.001 per share                                                                                 = $26,500
3. Calculation of Approximate value after split
Stock price at the time of split = $38 => Value of the split would be half of the price of share   = Stock price at the time of split / 2 = $38/2                 Approximate value after split = $19