Accounting for stock splits (Learning Objective 5) 5–10 min.

Suppose Nolan, Inc., has common stock, $8 par, 500,000 shares authorized, 120,000 shares issued and outstanding. The company also has Paid-in Capital in Excess of Par, common of $225,000 and Retained Earnings of $298,000. The company decided to split its common stock 2-for-1 in order to decrease the market price of its stock. The company’s stock was trading at $26 per share immediately before the split.

1. Show how the stockholders’ equity section of Nolan, Inc.’s balance sheet would appear after the stock split.

2. Which account balances changed after the stock split? Which account balances were unchanged?

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