Question

Can someone please explain this? I don't understand this at all

Answer 1

first we shall explain about 50 % stock dividend (par value):

for 50% stock dividend the new shares to be given will be 75,000 shares *50% stock dividend

=>37,500 shares

common stock, $10 par value, 75,000 shares issued and outstanding + 37,500 new shares => (75,000+37,500=112,500 shares*$10)	$1,125,000
paid in capital in excess of par value, common stock (no change)	200,000
retained earnings (410,000 - (37,500 shares *$10))=> (410,000-375,000)	35,000
total stockholder's equity	$1,360,000
common stock shares outstanding (75,000+37,500 new shares)	112,500

now,

about 3 for 1 stock split:

for 3 for 1 stock split, only change will be in the number of common stock shares outstanding and in par value per share.

new common stock share outstanding = 750,000 * 3 new shares / 1 old share

=>75,000*3

=>225,000.

common stock, par value 225,000 shares issued and outstanding	750,000
paid in capital in excess of par value common stock	200,000
retained earnings	410,000
total stockholder's equity	$1,360,000
common stock shares outstanding	225,000