Reference no: EM132915151

The shareholders' equity section of the statement of financial position of Del Rosso Winery Inc. at December 31, 2020, is given below:

Shareholders' equity:Preferred shares, $7 cumulative, unlimited authorized,
191,000 shares issued and outstanding$1,910,000Common shares, 200,000 authorized, 82,000 shares
issued and outstanding1,640,000Retained earnings2,687,000Total shareholders' equity$6,237,000

On December 31, 2020, the board of directors proposed a five-for-four common stock split. The proposal was approved and new shares were distributed among shareholders. The market price of the shares on December 31, 2020, was $26 per share.

Problem 1: Determine the number of shares that were distributed among the shareholders as a result of the five-for-four stock split.

Problem 2: What accounting entry will be made for this split?

Problem 3: What would be the expected market price for the shares after giving rise to the five-for-four stock split?

Problem 4: Show the shareholders' equity section of the company immediately after the five-for-four stock split.