Exercise 8-15 Determining the effects of stock splits on the accounting records

Question

Exercise 8-15 Determining the effects of stock splits on the accounting records LO 8-7

The market value of Dylan Corporation’s common stock had become excessively high. The stock was currently selling for $450 per share. To reduce the market price of the common stock, Dylan declared a 3-for-1 stock split for the 390,000 outstanding shares of its $10 par common stock.

Required

b.

Determine the number of common shares outstanding and the par value after the split. (Round your "Par value" to 2 decimal places.)

Explanation / Answer

After the split the number of common shares outstanding = 1,560,000 shares of par value $ 2.50 each.

Workings; Existing shares 390,000 Additional shares after the split = 390,000 x 3 Therefore total number of shares =1,560,000

Par value of each share = 3,900,000 / 1,560,000 = $ 2.5

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