The common stock of Alexander Hamilton Inc. is currently selling at $120 per share. The directors wish

Question:

The common stock of Alexander Hamilton Inc. is currently selling at $120 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 value. Nine million shares are issued and outstanding.

Instructions

Prepare the necessary journal entries assuming the following.

a) The board votes a 2-for-1 stock split.

b) The board votes a 100% stock dividend

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

Common Stock
Common stock is an equity component that represents the worth of stock owned by the shareholders of the company. The common stock represents the par value of the shares outstanding at a balance sheet date. Public companies can trade their stocks on... Par Value
Par value is the face value of a bond. Par value is important for a bond or fixed-income instrument because it determines its maturity value as well as the dollar value of coupon payments. The market price of a bond may be above or below par,...