A corporation, which had 37,400 shares of common stock outstanding, declared a 4-for-1 stock split. (a)...
A corporation, which had 37,400 shares of common stock outstanding, declared a 4-for-1 stock split.
(a) What will be the number of shares outstanding after the split?
(b) If the common stock had a market price of $96 per share before the stock split, what would be an approximate market price per share after the split? $__ per share?
(c) Is a journal entry required for a stock
split? Yes or no?
Homework Answers
(a) The number of shares outstanding after the split =
Number of shares outstanding * stock split multiple = 37,400 shares * 4 = 149,600 shares
(b) Market price per share after the split =
Stock splits will not affect the market value of the company. So the market capitalisation will remain same before and after the stock split.
Market capitalisation before stock split = Number of shares before split * Current market price
= 37,400 * 96
= $3,590,400
Market Price per share after split = Market capitalisation / Number of shares after split
= $3,590,400 / 149,600 shares
=$24 per share
(c) No. Journal entry is not required for a stock split since stock split does not affect the total value of stockholders equity.
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A corporation, which had 37,400 shares of common stock
outstanding, declared a 4-for-1 stock split.
(a)...
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