On June 30, 2015, Sharper Corporation’s common stock is priced at $62 per share

Question

On June 30, 2015, Sharper Corporation’s common stock is priced at $62 per share before any stock dividend or split, and the stockholders’ equity section of its balance sheet appears as follows. Common stock—$10 par value, 120,000 shares authorized, 50,000 shares issued and outstanding $ 500,000 Paid-in capital in excess of par value, common stock 200,000 Retained earnings 660,000 -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- Total stockholders’ equity $ 1,360,000 -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- 1. Assume that the company declares and immediately distributes a 50% stock dividend. This event is recorded by capitalizing retained earnings equal to the stock’s par value. Answer these questions about stockholders’ equity as it exists after issuing the new shares. 2. Assume that the company implements a 3-for-2 stock split instead of the stock dividend in part 1. Answer these questions about stockholders’ equity as it exists after issuing the new shares. a.,b.& c. Complete the below table to calculate the retained earnings balance, total stockholders’ equity and number of outstanding shares.

Explanation / Answer

Number of shares issued as stgock dividend = 50000 *50% =25000 shares

stock dividend Stock split Number of shares outstanding 50000+25000= 75000 50000*3/2 = 75000 common stock 75000*10 = 750000 500000 Paid-in capital in excess of par value, common stock 200000 200000 Retained earnings   660000- (25000*10)= 410000 660000 stockholders equity 1360000 1360000

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