Q11SE_1 - Horngren'S Financial And Managerial Accounting

Question

Accounting for a stock split

Decor and More Imports recently reported the following stockholders’ equity:

Common Stock—\(1 Par Value; 490,000,000 shares

 authorized, 119,000,000 shares issued and outstanding

Paid-In Capital:

654,000,000

\) 119,000,000

267,000,000

Retained Earnings

Total Stockholders’ Equity \( 921,000,000

Stockholders’ Equity

Paid-In Capital in Excess of Par—Common 148,000,000

Total Paid-In Capital

Suppose Decor and More split its common stock 2-for-1 in order to decrease the market price per share of its stock. The company’s stock was trading at \)17 per share immediately before the split.

Requirements

1. Prepare the stockholders’ equity section of the Decor and More Imports balance sheet after the stock split.

Step-by-Step Solution

Answer

The stockholders’ equity section of the balance sheet after the stock split shows $92,10,00,000 amount of total Shareholder’s Equity.

Step 1: Basic Introduction

Balance sheet is a financial statement that represents the value of assets, liabilities, and owners’ equity of a corporate at the end of the financial year.

Step 2: Balance sheet (Partial)

Décor and More Imports Balance sheet (Partial) Shareholder’s equity
Paid-in capital
Common Stock—$1 Par Value; 490,000,000 sharesauthorized, 119,000,000 shares issued and outstanding	$11,90,00,000
Paid-In Capital in Excess of Par—Common	$14,80,00,000
	$26,70,00,000
Add: Retained earnings	$65,40,00,000
Total Shareholder’s Equity	$92,10,00,000