Sample Problems Exercises 21.7 and 21.12.

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Sample Problems Exercises 21.7 and 21.12

Recording a stock split Lagovista Corporation had outstanding 200,000 shares of no-par-value common stock, with a stated value of $15, on December 1, 2007. The directors voted to split the stock on a 3-for-1 basis, issuing two new shares to stockholders for each share presently owned. The estimated market value of the new shares will be $14.50. Give any general journal entry required on December 1.

Journal Entry: 2007 Dec 1 On this date the board of directors declared a 3-for-1 stock split. Stated value will be reduced to $5 per share. After issue, 600,000 shares of common stock will be outstanding. *Stated value of stock before split was $15, so 15/3 = $5 Shares outstanding before split were 200,000, so 200,000 x 3 = 600,000

Exercise 21.12 Preparing Stockholders Equity section of the Balance Sheet The following are selected accounts from the general ledger of Fred’s Web Designs on December 31, 2007. Show how the corporation’s Stockholders’ Equity section would appear on the December 31, 2007 balance sheet.

Balance Sheet (Partial) Exercise 21.12 FRED’S WEB DESIGNS Balance Sheet (Partial) December 31, 2007 Stockholders’ Equity Paid-in Capital Common stock ($25 par, authorized 8,000 shares) Issued & Outstanding, 6.000 shares 150,000 Paid-in Capital in excess of par 8,000 Total Paid-in-Capital 158,000 Retained Earnings (deficit) (24,000) Total Stockholders’ Equity 134,000