Stock Split

Stockholders’ Equity
The Corporate Corporate Presentation and

Preferred Stock Dividend Policy
Form Capital Analysis
State Issuance of Features Financial Presentation

corporate law stock Accounting condition and Analysis
Capital stock Reacquisition for and dividend
or share of shares reporting distributions
system Stock split preferred Types of
Variety of stock dividends
Stock
ownership warrants Disclosure of
interests restrictions
Stock or Share Split
Stock split is the change in the number of stocks

and par value.
The effect of the split is that a new par value and
the number of shares authorized, issued, and
outstanding.
Share split will not alter the amount of
authorized, subscribed and issued and
outstanding.
Could be a share split up or down.
Share split UP happens when the number of shares
increases with the corresponding decrease in the
par value. The amount of share capital will not
change.
Authorized common shares 500,000 Authorized common shares 1,000,000
Issued and outstanding 150,000 Issued and outstanding 300,000
Par value 20 2:1 Share Par value 10
Split
Amount of common capital* 3,000,000 Amount of common capital* 3,000,000
*Issued x par value *Issued x par value
2:1 means that for every 1 share issued and outstanding

cancelled, 2 new shares will be issued
Share split DOWN happens when the number of
shares decreases with the corresponding increase
in the par value. The amount of share capital will
not change.
Authorized common shares 1,000,000 Authorized common shares 500,000
Issued and outstanding 300,000 Issued and outstanding 150,000
Par value 10 1:2 Share Par value 20
Amount of common capital* 3,000,000 Split Amount of common capital* 3,000,000
*Issued x par value *Issued x par value
1:2 means that for every 2 shares issued and outstanding

cancelled, 1 new share will be issued
Stock or Share Warrant
A stock warrant is a contract between a company and

investors that gives the investor the option to purchase the
company's stock at a specific price and by a specific date.
A stock warrant allows the holder to receive newly issued

stock from the same company that provided the warrant.
While the warrant expires after a certain date, the investor
is still allowed to make the stock warrant purchase (via
common stocks) at a later date if he or she chooses.
Also know as Stock Rights.

Accounting for Stock Warrant

Issued separately
Not to be accounted for separately
Issued with another security
To be accounted for separately. A new account as
stock warrant is to be recorded and recognized based
on
Proportional value method
Incremental value method
Intrinsic value method
LO 3 Explain the accounting procedures for issuing shares of stock.
Terms
Market value is the fair value of the security, whether
shares or warrants
Exercise price is the amount of which the holder of
the warrant can buy new common shares
Expiry date is the date until warrants can be
exercised.
Note: When the warrants is exercised, the value of the
shares purchased is equal to the Exercised Price of the
Common shares and the Value of the warrants used to
purchased.
LO 3 Explain the accounting procedures for issuing shares of stock.
Stock or Share Warrant: Issued separately
Illustration 1: Issued 30,000 warrants to shareholders, 1 warrant
on each share, permitting holders to acquire one common share
of P50 par value at P60 with every 5 warrants submitted.
Shares are selling at P30 per share at this time. Subsequently,

20,000 warrants are exercised and 10,000 warrants expired.
Stock or Share Warrant: Issued separately
a Issuance of stock warrants
No entry
b. Exercise of stock warrants
No. of warrants exercised 20,000

Divide by the no. of rights used to
buy 1 share 5
No. of shares purchased 4,000
Exercised price 60
Cash received 240,000
Cash 240,000
Common stock
(4,000 shares at P50 par) 200,000
Share premium - common 40,000
c. Expiration of stock warrants

No entry
Stock or Share Warrant: Issued with another
share (preferred share) Proportionate
Issued 20,000 preference shares of P100 par value for

P2,400,000, with 20,000 warrants to acquire 10,000
common shares with P50 par per share, at P60 exercise
price.
On the date of the issuance, the warrants have a

market value of P10 and the preference share has a
value of P115 per share ex-warrant.
Subsequently, 12,000 warrants were exercised and the

remainder lapsed.
share (preferred share) Proportionate
No. Value Amount Allocation
Preference share 20,000 115 2,300,000 2,208,000
Stock warrant 20,000 10 200,000 192,000
2,500,000 2,400,000
Cash 2,400,000
Stock warrants 192,000
Preference share (20,000 x P100 par) 2,000,000
Share premium - preferred 208,000

Divide by the no. of rights used to buy 1 share
(20,000 rights/10,000 shares) 2
Exercised price 60
Cash 360,000
Stock warrants (12,000/20,000) x 192,000 115,200
Common stock (6,000 shares at P50 par) 300,000

share (preferred share) Incremental

price.
On the date of the issuance, the warrants have a

market value of P10, but the preference share has no
known market value ex-warrant.

remainder lapsed.
share (preferred share) Incremental
No. Value Allocation
Preferred share 20,000 2,200,000
Stock warrant 20,000 10 200,000
2,400,000
Cash 2,400,000

Divide by the no. of warrantss used to buy 1 share
(20,000 warrants/10,000 shares) 2
Exercised price 60
Cash 360,000
Stock warrants (12,000/20,000) x 200,000 120,000

share (preferred share) Intrinsic

price.
On the date of the issuance, the warrants and the

preference shares do not have a market value but only
the common share has a market value of P78 per share.

remainder lapsed.
Stock or Share Warrant: Issued with another share
(preferred share) Intrinsic
Market value of common share 78
Exercise price 60
Intrinsic value 18
Divide by the no. of warrants used to buy 1 share
(20,000 warrants/10,000 shares) 2
No. of shares purchased 9
No. of warrants issued 20,000
Value of the warrants 180,000
Cash 2,400,000

Divide by the no. of rights used to buy 1 share
(20,000 rights/10,000 shares) 2
Exercised price 60
Cash 360,000
Stock warrants (12,000/20,000) x 180,000 108,000


Stock Split

Uploaded by

Document Information

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Stock Split

Uploaded by

Copyright:

Available Formats

Stockholders’ Equity

The Corporate Corporate Presentation and

State Issuance of Features Financial Presentation

Stock split is the change in the number of stocks

2:1 means that for every 1 share issued and outstanding

1:2 means that for every 2 shares issued and outstanding

A stock warrant is a contract between a company and

A stock warrant allows the holder to receive newly issued

Also know as Stock Rights.

Accounting for Stock Warrant

Shares are selling at P30 per share at this time. Subsequently,

b. Exercise of stock warrants

No. of warrants exercised 20,000

c. Expiration of stock warrants

Issued 20,000 preference shares of P100 par value for

On the date of the issuance, the warrants have a

Subsequently, 12,000 warrants were exercised and the

b. Exercise of stock warrants

c. Expiration of stock warrants

Issued 20,000 preference shares of P100 par value for

On the date of the issuance, the warrants have a

Subsequently, 12,000 warrants were exercised and the

b. Exercise of stock warrants

c. Expiration of stock warrants

Issued 20,000 preference shares of P100 par value for

On the date of the issuance, the warrants and the

Subsequently, 12,000 warrants were exercised and the

b. Exercise of stock warrants

c. Expiration of stock warrants

You might also like