Problem:
(Stock Split and Stock Dividend) The common stock of Alexander Hamilton 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.
Instructions
Prepare the necessary journal entries assuming the following.
1. The board votes a 2-for-1 stock split.
2. The board votes a 100% stock dividend.
3. Briefly discuss the accounting and securities market differences between these two methods of increasing the number of shares outstanding.