ACK NEXT wo courses of action dedarng a 6 stock dividend on

ACK NEXT wo courses of action:) dedarng a 6% stock dividend on the 26.3oo, $10 par value shares outstanding, or (2) effecting a 2-for-1 stock spilt that will reduce par value to Paid-in capital Common stock Retained earnings Outstanding shares

Solution

Before Action After Stock Dividend After Stock Split Stockholder Equity: Paid In Capital Common Stock $265,000.00 $280,900.00 $265,000.00 In Excess Par Value $0.00 $9,540.00 $0.00 Total Paid In Capital $265,000.00 $290,440.00 $265,000.00 Retained Earnings $883,000.00 $873,460.00 $883,000.00 Total Stockholder Equity $1,148,000.00 $1,163,900.00 $1,148,000.00 Oustanding Shares 26,500.00 28,090.00 53,000.00 Par value per share $10.00 $10.00 $5.00 After Stock Dividend # shares = $26500 x 6% 1,590.00 Total no. of shares outstanding = 26500 + 1590 28,090.00 Common Stock = 10 x 28090 280,900.00 In excess par = 1590 x ($16 - $10) 9,540.00 Retained Earnings = $883,000 - 9540 $873,460.00 After Stock Split Outstanding Shares = 26500 x 2 53,000.00