Problem - The common stock of Brandy, Inc is currently selling at $120 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 $10; book value is $70 per share. Nine million shares are issued and outstanding.
Required: Prepare the necessary journal entries assuming the following.
(a) The board declares and issues a 2-for-1 stock split.
(b) The board declares and issues a 100% stock dividend.
(c) Briefly discuss the accounting and securities market differences between these two methods of increasing the number of shares outstanding.