On September 1, Ziegler Corporation had 50,000 shares of $5 par value common stock, and $1,500,000...
On September 1, Ziegler Corporation had 50,000 shares of $5 par value common stock, and $1,500,000 of retained earnings. On that date, when the market price of the stock is $15 per share, the corporation issues a 2-for-1 stock split. The general journal entry to record this transaction is:
Multiple Choice
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Debit Retained Earnings $750,000; credit Common Stock Split Distributable $750,000.
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Debit Retained Earnings $750,000; credit Common Stock $750,000.
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Debit Retained Earnings $250,000; credit Common Stock $250,000.
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Debit Retained Earnings $250,000; credit Stock Split Payable $250,000.
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No entry is made for this transaction.
Homework Answers
Correct option is: No entry is made for this transaction
Stock split does not requires a journal entry to be recorded as it increases the numbers of shares held and Par value per share changes but the total value of the stockholder's equity will remain same
In this case, Number of shares changed to (50000 X 2) = 100000 shares and Par value per share reduces to ($5 / 2) = $2.50 which gives equity shares valuing (100000 shares X $2.50) = $250000 which is equal to before as of stock split
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