Ryan owns 100 shares in Marshall Manufacturing, currently selling for $80 per share. His stock split yesterday 3-for-1. The number of shares that Ryan owns has tripled.
Answer the following statement true (T) or false (F)
True
The value of Ryan's stock has, theoretically, remained unchanged. A 3-for-1 stock split would likely decrease the market value of each share. Ryan has tripled his number of shares; however, they are worth proportionately less per share.
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On January 1, 2018, Nichols Company acquired 80% of Smith Company's common stock and 40% of its non-voting, cumulative preferred stock. The consideration transferred by Nichols was $1,200,000 for the common and $124,000 for the preferred. There was no premium in the value of consideration transferred. Any excess acquisition-date fair value over book value is considered goodwill. The capital structure of Smith immediately prior to the acquisition is: Common stock, $10 par value (50,000 shares outstanding)$500,000 Preferred stock, 6% cumulative, $100 par value, 3,000 shares outstanding 300,000 Additional paid in capital 200,000 Retained earnings 500,000 Total stockholders' equity$1,500,000 ?The consolidation entry at date of acquisition will include (referring to Smith):
A. Debit Common stock $500,000, debit Preferred stock $120,000, and debit Additional paid-in capital $200,000. B. Debit Common stock $400,000, debit Preferred stock $300,000, debit Additional paid-in capital $200,000, and debit Retained earnings $500,000. C. Debit Common stock $400,000 and debit Additional paid-in capital $160,000. D. Debit Common stock $500,000 and debit Preferred stock $120,000. E. Debit Common stock $500,000 and debit Preferred stock $300,000.