Accounting: Incorporated in Maryland in 1996, Under Armour, Inc

Subject: Business    / Accounting
Question

Incorporated in Maryland in 1996, Under Armour, Inc. describes itself as “developing, marketing and distributing branded performance apparel, footwear and accessories for men, women and youth.”

On June 15, 2015, Under Armour announced the creation of a new class of non-voting common stock, the Class C common stock. The press release stated that:

Under Armour expects to issue Class C stock through a stock dividend to all existing holders of Under Armour’s Class A and Class B common stock, which will have the same effect as a two-for-one stock split. Each holder of a share of Class A or Class B stock will receive one share of the new Class C stock.

Do you agree or disagree that the effect of the Class C stock dividend will be the same as a two-for- one stock split? As an example, assume the transaction would have occurred on January 1, 2015. On the basis of the information on Under Armour’s Consolidated Balance Sheet for December 31, 2014 (excerpted and presented on the next page of this assignment), what journal entry would be required to record (a) a two-for-one stock split, and (b) the Class C stock dividend?

a) Two-for-one stock split:
b) Class C stock dividend:

Do you agree or disagree that the effect of the Class C stock dividend will be the same as a two-for- one stock split?