Question

On September 1, Ziegler Corporation had 50,000 shares of $5 par value common stock, and $1,500,000 of retained earnings. On that date, when the market price of the stock is $15 per share, the corporation issues a 2-for-1 stock split.
What would the general journal entry to record this transaction be:
-Debit Retained Earnings $750,000; credit Common Stock Split Distributable $750,000.
-Debit Retained Earnings $750,000; credit Common Stock $750,000.
-Debit Retained Earnings $250,000; credit Common Stock $250,000.
-Debit Retained Earnings $250,000; credit Stock Split Payable $250,000.
-No entry is made for this transaction.

Answer 1

Answer:

No entry is made for this transaction

Explanation:

As for the information provided, it is clear that the equity shares held are now to be split off.

Under split off basically, the number of shares increases, where the par value decreases with the same ratio.

Under the given instance, the original number of shares = 50,000

Now after split off number of shares = 50,000 $\times$ 2 = 100,000

Also par value shall be $5/2 = $2.5 per share.

Total value of equity shares = $100,000 $\times$ $2.5 = $250,000

There will be no change in equity other than this, therefore, no entry will be recorded for the same split off.