My company is doing a reverse stock split, no change on par value

Originally we have 100 million shares at a par value of $.001 for an amount on General Ledger of $100,000.00

We are doing 1 for 3 reverse split.

I know that debit will need to go to Common Stock account, where will credit go? APIC???

Dr. Common Stock $66,666.66
Cr. ??????? $66,666.66

Thank you in advance,
Herman

richsaha2007

There are no journal entries for a stock split or a reverse stock split. The books will still be the same. What is required is a memorandum describing the stock split. Since it is a reverse split, you decrease your number of shares and increase your stock price.

100,000,000 shares / 3 = 33,333,333.33

stock price: .001 * 3 = .003

when you multiply 33,333,333.33 * .003 = 99,999.99 = 100,000.00

Stock splits do not affect the books

Hermansherman

Do not agree, if I do not make an entry then I will have 33,333,333 shares par value of .001 but the amount in the account will be $100,000.00
I feel I have to make an entry within Shareholders Equity in order to have the correct par value stated with the shares.

richsaha2007

No journal entry is needed at all for a reverse stock split. The result is all the same. All you need is a memorandum to describe what you did. If you believe an entry is needed, please tell me. You can google it, yahoo it and it will be in my favor.

Hermansherman

Rich,

Thank you for taking the time to respond.

Perhaps if I rephrase my question, you will see my dilemma
One fact I would like to reiterate is that there is no change in par value with this reverse stock split, the par value remains unchanged is in all the legal documentation, notification to shareholders, etc.

Pre-split if you look at my Balance Sheet you will see

Common stock 100,000,000 shares par value $.001 $100,000

If as you suggest, the reverse split happens and I make no entry, this is what my Balance sheet will look like:

Common stock 33,333,333 shares par value $.001 $100,000

Clearly this is a problem, as 33,333,333 * .001 does not equal $100,000

That is why I think I need to put in an entry to reduce the Common Stock account to be $33,333.

Your thoughts?
Regards,
Herman

richsaha2007

I went to the SEC.GOV website to give you a definition of a reverse stock split. Reverse Stock Splits

I have never heard of a reverse stock split where the price stays the same. The goal of a reverse stock split for companies is when they believe the price of their stock is too low to attract investors to buy their stock.

Hermansherman

You have no idea what you are talking about.
What a joke.
The reverse stock split will definitely increase the stock price.
However the par value will remain unchanged.
That is causing the accounting difficulty that I was seekint the help from an expert.
You, my friend, are no expert as clearly you have no idea that I am talking about the par value and not the price of the stock.
I would highly encourage you to study up more before you attempt to answer questions on this site.