27. EX11#27:STOCK DIVIDENDS ware Company is authorized to sell 1,000,000 shares

Question

27. EX11#27:STOCK DIVIDENDS ware Company is authorized to sell 1,000,000 shares of $3 par value common stock. There are 500,000 shares issued and outstanding and the board of directors declares a 10% stock dividend. The market price is $20 per share. What is the effect on retained earnings? A) A debit entry of $1,000,000 B) A credit entry of $1,000,000 C) A debit entry of $2,000,000 D) A credit entry of $2,000,000 28, EX 11#28: STOCK SPLITS: Glass Corporation has outstanding 100,000 shares of $3 par value common stock with a fair market value of $60 per share. If the board of directors declares a 2-for-1 stock split, then the effects are: A) The par value remains $3 and the fair market value decrease to $30 The par value and fair market value remain the same. The par value decreases to $1.50 and the fair market value decreases to $30. The par value decreases to $1.50 and the fair market value remains the same at $60. B) C) D)

Explanation / Answer

Answer:27.A.Debit entry of $ 1000000

Retained earnings a/c        Dr. $ 1000000

        To Common Stock Dividend Distributable $ 1000000

Answer:28.D.The par value decreases to $ 1.50 and the fair market value remains the same at $ 60.

For stock split number of outstanding shares increases and price per share decreases but market capitalization does not change

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