E14.13 (LO 3) (Share Split and Share Dividend) The ordinary shares of Otuk Holding are currently selling at 110 per share. The directors wish to reduce the share price and increase share volume prior to a new issue. The per share par value is 10; book value is 70 per share. Five million shares are issued and outstanding.

Instructions

a. Prepare the necessary journal entries assuming that the board votes a 2-for-1 share split.

b. Prepare the necessary journal entries assuming that the board votes a 100% share dividend.

c. Briefly discuss the accounting and securities market differences between these two methods of increasing the number of shares outstanding.