The common shares of Hoover Inc. are currently selling at $143 per share. The directors want to reduce the share price and increase the share volume before making a new issue. The per share carrying value is $34. There are currently 9 million shares issued and outstanding.
Instructions
(a). Prepare the necessary journal entries assuming that:
1. The board votes a 2-for-1 stock split.
2. The board votes a 100% stock dividend.
(b). Briefly discuss the accounting and securities market differences between these two methods of increasing the number of shares outstanding.