Need help with this problem please Suppose Nolan Inc has com

Need help with this problem please:

Suppose Nolan, Inc., has common stock, $8 par, 500,000 shares authorized, 120,000 shares issued and outstanding. The company also has Paid-in capital in excess of par, common of $225,000 and Retained earnings of $298,000. The company decided to split its common stock 2-for-1 in order to decrease the market price of its stock. The company\'s stock was trading at $26 per share immediately before the split. 1. Show how the stockholders\' equity section of Nolan, Inc.\'s balance sheet would appear after the stock split 2. Which account balances changed after the stock split? Which account balances were unchanged? 1. Show how the stockholders equity section of Nolan, Inc.\'s balance sheet would appear after the stock split. (Enter the accounts in the proper order for the stockholders\' equity section of the balance sheet.) Stockholders\' Equity Paid-in capital: Total stockholders\' equity

Solution

Answer =1 STOCKHOLDER\'S EQUITY (BEFORE THE STOCK SPLIT) Paid in Capital $            9,60,000 (120,000 shares $ 8 per shares) Excess of Par - Common $            2,25,000 Retained Earning $            2,98,000 Total Stockholder\'s Equity $         14,83,000 Stock is split its common stock in 2 for 1 it means 1 addittioanal sharea are issued against outstanding of one shares Currently there 120,000 shares outstanding , So can issue a fresh 120,000 new sahres and par value of the same is reduced in the same proportion. New Par Value = $ 8 / 2 = $ 4 per shares So now there is 240,000 shares of $ 4 per shares STOCKHOLDER\'S EQUITY (AFTER THE STOCK SPLIT) Paid in Capital $            9,60,000 (240,000 shares $ 4 per shares) Excess of Par - Common $            2,25,000 Retained Earning $            2,98,000 Total Stockholder\'s Equity $         14,83,000 Answer =2 When a stock splits, it has no effect on stockholders\' equity. During a stock split, the company does not receive any additional money for the shares that are created. If a company simply issued new shares it would receive money for these, which would increase stockholders\' equity. Similarly, stockholders\' equity decreases if dividends are issued to shareholders. Stockholder equity can also be affected by net revenues and net losses. But stock splits will have no impact on stockholders\' equity. So there is no impact on any account balance after the stock split.