Question

Question 9 The common stock of Indigo Inc. is currently selling at $114 per share. The directors wish to reduce the share price and increase share volume prior to a new issue. The per share par value is $10; book value is $69 per share. 9.70 million shares are issued and outstanding. Prepare the necessary journal entries assuming the following. (Enter amounts in dollars. Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter o for the amounts.) (a) The board votes a 2-for-1 stock split. (b) The board votes a 100% stock dividend. No. Account Titles and Explanation Debit Credit (a) (b) (To record the declaration) (To record the distribution) Click if you would like to Show Work for this question: Open Show Work

Answer 1

Solution:

No	Accounts titles and Explanation	Debit	Credit
a.	No entry
b	Retained earnings a/c Dr (10 x 9.70million)	9,700,000
	To common stock dividend distributable a/c		9,700,000
	(To record the declaration)
	Common stock dividends distributable a/c Dr	9,700,000
	To common stock a/c		9,700,000
	(To record the distribution)

Explanation:

a. No entry because simply a memorandum note indicating the number of shares has increased to 19.4(9.7 x 2) million and par value has been reduced from $10 to $5 per share