Treasury Stock and Stock Split
Twin Towns, Inc., was authorized to issue 300,000 shares of common stock and originally issued 100,000 shares of $10 par value stock at $18 per share. Subsequently, 25,000 shares were repurchased at $20, of which 10,000 were subsequently resold at $23.
Assume the company’s retained earnings balance is $120,000.
a. Prepare the stockholders’ equity section of Twin Towns’s balance sheet, including all appropriate disclosures.
b. Briefly explain how the declaration and distribution of a 2-for-1 stock split subsequent to the above transactions would affect the stockholders’ equity section you have prepared.
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