E15-13B (Stock Split and Stock Dividend)
The common stock of Liberty Homes Inc. is currently selling at $88 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 $4; book value is $36 per share. Fifteen million shares are issued and outstanding.
Instructions
Prepare the necessary journal entries assuming the following.
(a) The board votes a 4-for-1 stock split.
(b) The board votes a 300% stock dividend.
(c) Briefly discuss the accounting and securities market differences between these two methods of
increasing the number of shares outstanding.
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