How will Toro account for its two-for-one stock split? Original blog posting (September 6, 2016)

The Toro Company Manufacturer of lawn care products Fiscal year end is October 31 10/31/2015: Toro had authorized 175,000,000 shares of common stock and 54,650,916 shares issued and outstanding 08/24/2016: Toro’s stock price was $98.27 per share

The Toro Company 08/18/2016, Toro issued the following press release: Toro also announced today that its Board of Directors has declared a two-for-one split of the company’s common stock, which will be effected in the form of a 100 percent stock dividend. The stock dividend will be distributed on September 16, 2016, to shareholders of record as of September 1, 2016.

Question 1 What is a stock split? Why might a company want to do a stock split?

Question 2 How many shares of issued and outstanding common stock will Toro have after the stock split?

Question 3 On what date will the stock split occur? What will happen, in general, to the Toro common stock price following the split?

Question 4 If a person sells all 100 shares he/she owns of Toro stock on September 2, will he/she receive the stock dividend? Why?

Question 5 What entry, if any, will Toro make to account for the stock split? Explain.

Question 6 Why do you think Toro would have a fiscal year end of October 31?

Question Recap 1. What is a stock split? Why might a company want to do a stock split? 2. How many shares of issued and outstanding common stock will Toro have after the stock split? 3. On what date will the stock split occur? What will happen, in general, to the Toro common stock price following the split? 4. If a person sells all 100 shares he/she owns of Toro stock on September 2, will he/she receive the stock dividend? Why? 5. What entry, if any, will Toro make to account for the stock split? Explain. 6. Why do you think Toro would have a fiscal year end of October 31?

For additional news stories to use in the accounting classroom, see the Accounting in the Headlines blog at http://accountingintheheadlines.com/ Questions or comments? Contact Dr. Wendy Tietz at wtietz@kent.edu