Q31E - Horngren'S Financial And Managerial Accounting

Question

Reporting stockholders’ equity after a stock split

Wood Golf Club Corp. had the following stockholders’ equity at December 31, 2017:

Common Stock—\(1 Par Value; 650 sharesauthorized, 270 shares issued and outstanding

Paid-In Capital:

2,600

\) 270

810

Retained Earnings

Total Stockholders’ Equity $ 3,410

Stockholders’ Equity

Paid-In Capital in Excess of Par—Common 540

Total Paid-In Capital

On June 30, 2018, Wood Golf Club split its common stock 2-for-1. Prepare the stockholders’ equity section of the balance sheet immediately after the split. Assume the balance in retained earnings is unchanged from December 31, 2017.

Step-by-Step Solution

Answer

Total shareholders’ equity of the company is $3,410

Step 1: Basic Introduction

$\begin{array}{rcl}\mathbf{NumberofSharesPost}\mathbf{-}\mathbf{Split}& \mathbf{=}& \mathbf{NumberofShares}\mathbf{\times }\mathbf{StockSplit}\\ & \mathbf{=}& \mathbf{270}\mathbf{\times }\mathbf{2}\\ & \mathbf{=}& \mathbf{540}\\ & & \end{array}$

$\begin{array}{rcl}\mathbf{StockPricePost}\mathbf{-}\mathbf{Split}& \mathbf{=}& \frac{\mathbf{StockPriceBeforeStockSplit}}{\mathbf{StockSplit}}\\ & \mathbf{=}& \frac{\mathbf{\$}\mathbf{1}}{\mathbf{2}}\\ & \mathbf{=}& \mathbf{\$}\mathbf{0}\mathbf{.}\mathbf{5}\\ & & \end{array}$

Step 2: Balance sheet (Partial)

Balance sheet (Partial) Dec 31, 2017
Shareholders’ Equity
Common Stock—$0.5 Par Value; 650 shares authorized, 540shares issued andoutstanding	$270
Paid-In Capital in Excess of Par—Common	$540
	$810
Retained Earnings	$2,600
Total Stockholders’ Equity	$3,410