Werling Co.had 10, 000 shares of $8 par common stock outstanding just prior to a stock split.The stock was split two-for-one and the par value was reduced to $3.Which entry correctly records this stock split?
A)
$\begin{array}{rr}
\text { Common Stock, \$8 par } & 80,000 \
\text { Common Stock, \$3 par } && 80,000
\end{array}$

B)
$\begin{array}{lc}
\text { Common Stock, \$8 par } & 80,000 \
\text { Common Stock, \$3 par } & \quad\quad60,000 \
\text { Additional Paid-in Capital from Stock Split } & 20,000
\end{array}$

C)
$\begin{array}{lc}
\text { Common Stock, \$8 par } & 80,000 \
\text { Common Stock, \$3 par } & 60,000 \
\text { Gain on Stock Split } & 20,000
\end{array}$

D)
$\begin{array}{lc}
\text { Common Stock, \$8 par } & 80,000 \
\text { Common Stock, \$3 par } & 60,000 \
\text { Gain on Surplus} & 20,000
\end{array}$

Question

Werling Co.had 10, 000 shares of $8 par common stock outstanding just prior to a stock split.The stock was split two-for-one and the par value was reduced to $3.Which entry correctly records this stock split?
A) 
$\begin{array}{rr}
\text { Common Stock, \$8 par } & 80,000 \
\text { Common Stock, \$3 par } && 80,000
\end{array}$

B)
$\begin{array}{lc}
\text { Common Stock, \$8 par } & 80,000 \
\text { Common Stock, \$3 par } & \quad\quad60,000 \
\text { Additional Paid-in Capital from Stock Split } & 20,000
\end{array}$

C)
$\begin{array}{lc}
\text { Common Stock, \$8 par } & 80,000 \
\text { Common Stock, \$3 par } & 60,000 \
\text { Gain on Stock Split } & 20,000
\end{array}$

D)
$\begin{array}{lc}
\text { Common Stock, \$8 par } & 80,000 \
\text { Common Stock, \$3 par } & 60,000 \
\text { Gain on Surplus} & 20,000
\end{array}$

Quizplus · Accepted Answer

A two-for-one stock split doubles the number of shares outstanding, so after the split, Werling Co. would have 20,000 shares outstanding. The par value would be reduced from $8 to $3, but this does not result in any actual change in the company's equity or assets. Therefore, the entry should reflect solely the increase in shares outstanding and the reduction in par value. Option B correctly records this split by increasing the Common Stock account by 60,000 shares at the new $3 par value, resulting in a total of $180,000 in Common Stock. No additional paid-in capital or gain on the split is necessary.

Werling Co Common Stock, $8 par 80,000 Common Stock, $3 par 80,000\begin{array}{rr}\text { Common Stock, \$8 par } & 80,000 \\\text { Common Stock, \$3 par } && 80,000\end{array} Common Stock, $8 par Common Stock, $3 par ​80,000​80,000​

Werling Co $\begin{array}{rr}\text { Common Stock, \$8 par } & 80,000 \\\text { Common Stock, \$3 par } && 80,000\end{array}$