Hello,The following problem is giving me fits

Why do companies go through a closing process?
May 5, 2020
Can anyone provide guidance on the following
May 5, 2020

Hello,<br/><br/><br/>The following problem is giving me fits:<br/><br/><br/>Magic

Blade’s stock has risen rapidly to $50 per share. The increase is due to excitement about its new knife that uses a light beam to slice fruits and vegetables. This process enhances the final appearance and quality of salads and fruit trays.

The board of directors is considering strategies to divide the corporate ownership into more shares of stock, and bring about some reduction in the price per share. They are considering a stock split, small stock dividend, or large stock dividend. The board is unsure of the accounting effects of such transactions, and has requested information about how stockholders’ equity would be impacted.

Prior to the contemplated stock transaction, equity consisted of:

Common stock, $2 par, 2,000,000 shares authorized, 500,000 $1,000,000
shares issued and outstanding

Paid-in capital in excess of par $2,000,000

Retained earnings $6,000,000

Total stockholders’ equity $9,000,000

(a). Assuming the board were to declare a 2 for 1 split, how would the revised stockholders’ equity appear?

(b). Assuming the board were to declare a 15% stock dividend, how would the revised stockholders’ equity appear?

(c). Assuming the board were to declare a 50% stock dividend, how would the revised stockholders’ equity appear?

(d). Prepare journal entries that would be needed (if necessary) to record the proposed transactions from part (a), (b), and (c).

Any help with this would be awesome!

Thank you.

 
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