XYZ has 100,000 shares of $10 par value common stock issued and outstanding. 1.

Question

XYZ has 100,000 shares of $10 par value common stock issued and outstanding.

1. XYZ issues a 10% stock dividend. Calculate the credit amount to the common stock account.

2. XYZ issues a 50% stock dividend. Calculate the credit amount to the common stock account.

The market price for XYZ stock is $100 per share. Instead of stock dividends, XYZ issues a 4:1 stock split

1. Calculate the number of shares after the split.

2. Calculate the approximate market price per share after the split.

3. Calculate the par value for a share of common stock after the split.

Explanation / Answer

Outstanding common stock                  100,000 Nos Par value $                   10.00 1 For 10% stock dividend, . No of additional share issued                     10,000 Share value of additional shares $              100,000 So Common Stock will be credited By $              100,000 2 For 50% stock dividend No of additional share issued                     50,000 Share value of additional shares $              500,000 So Common Stock will be credited By $              500,000 Stock Split 4:1 Outstanding common stock before split                  100,000 Nos 1 Outstanding common stock after split                  400,000 Nos Market price /share before split $                      100 2 Approx. Market price /share after split $                         25 Par value before split $                   10.00 3 Par value of common stock after split $                     2.50

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