The common stock of Swifty Inc. is currently selling at $120 per share. The directors wish to reduce the share price and increase share volume prior to a new issue. The per share par value is $10; book value is $75 per share. 10.50 million shares are issued and outstanding. Required:
Prepare the necessary journal entries assuming the following.
a. The board declares and issues a 2-for-1 stock split.
b. The board declares and issues a 100% stock dividend.
c. Briefly discuss the accounting and securities market differences between these two methods of increasing the number of shares outstanding.

A. No Entry

No Entry

B. Dr Retained Earnings $105,000,000

Cr Common Stock Dividend Distributable $105,000,000

Dr Common Stock $105,000,000

Cr Common Stock $105,000,000

Explanation:

A. Preparation of the necessary journal entries assuming the The board declares and issues a 2-for-1 stock split.

No Entry

No Entry

B. Preparation of the necessary journal entries assuming theThe board declares and issues a 100% stock dividend.

Dr Retained Earnings $105,000,000

Cr Common Stock Dividend Distributable $105,000,000

($10 x 10.50 million)

(To record the declaration)

Dr Common Stock $105,000,000

Cr Common Stock $105,000,000

(To record the distribution)

what

explanation:

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