Subject: Share Dividends & Share Splits

On Jan. 1, 2016, the records of McKinley Corporation showed the following balances:

Ordinary Shares, $1 par	$ 80,000
Share Premium - Ordinary	920,000
Retained Earnings	760,000

On Jan 15, 2016, the board of directors declared a 3% share dividend; the stock's market price was $50 per share. On Nov 4, 2016, the board of directors declared a 2-for-1 share split; the stock's market price was $90 per share.

Required: Show all computations

1. How many shares of stock were outstanding on Jan1, Mar 31, and Dec 31, 2016 assuming no other events related to shareholder's equity occurred?

2. What effect did the share dividends have on total shareholder's equity?

3. Prepare the entries for these 2 events.

4. Why would a corporation declare a share split?

5. What would the second entry have been if the corporation had declared a 100% share dividend instead of a 2-for-1 share split?