Stock dividend and stock split
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28. Angie's just declared a 5% (small) stock dividend. Prior to the dividend, the stock had a $1 par value per share, a $15 market value per share. As a result of this dividend, the:
a. common stock account will remain constant
b. common stock account will decrease in value
c. retained earnings account will increase in value
d. capital in excess of par value account will increase in value.
29. Smitty Tool has 18000 shares of stock outstanding with a par value of $1 per share and a market value of $41 per share. The company just declared a 2-for-1 stock split. As a result of this split:
a. the total value of the owner's equity will be cut in half.
b. the # of shares outstanding will increase to 36,000
c. market price per share will increase to 82 a share.
d. par value per share will remain at $1 per share.
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The solution explains two questions relating to stock dividend and stock split.
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28. d. capital in excess of par value account will increase in value.
The stock dividend would result in the issue of new shares at the market ...
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