Reference no: EM133064878

Question - Bacon Inc. has the following stockholders' equity section in its May 31, 2019, comparative balance sheets:

	May 31, 2019	April 30, 2019
Paid-in capital:
Preferred stock, $140 par value, 8%, cumulative, 100,000 shares authorized, 70,000 shares issued and outstanding	$9,800,000	$9,800,000
Common stock, $8 par value, 600,000 shares authorized, 400,000 and 380,000 shares issued, respectively	3,200,000	3,040,000
Additional paid-in capital	14,650,000	14,100,000
Retained earnings	12,050,000	11,774,000
Less: Treasury common stock, at cost; 19,000 shares and 18,000 shares, respectively	(1,748,000)	(1,728,000)
Total stockholders' equity	$37,952,000	$36,986,000

a-1. Assume that on June 1 the market value of the common stock was $40 per share and that the board of directors declared a 6% stock dividend on the issued shares of common stock. Use the horizontal model to show the issuance of the stock dividend. Indicate the financial statement effect.

a-2. Assume that on June 1 the market value of the common stock was $40 per share and that the board of directors declared a 6% stock dividend on the issued shares of common stock. Prepare journal entry to show the issuance of the stock dividend. Record the declaration of 6% stock dividend.

b. Assume that instead of the stock dividend described in a, the board of directors authorized a 2-for-1 stock split on June 1 when the market price of the common stock was $40 per share.

1. How many shares of common stock will be authorized after the split?

2. What will be the market price per share of common stock after the split?

3. How many shares of common stock will be in the treasury after the split?