Do It! Review 11-3b Oriole Company has had 4 years of record earnings. Due to th

Question

Do It! Review 11-3b Oriole Company has had 4 years of record earnings. Due to this success, the market price at $5,220,000. Retained earnings increased from $3,915,000 to $26,100,000. CEO Don An retained earnings, (b) total stockholders equity, and (c) par value per share. 1. Stock dividend - retained earnings 2. 2-for-1 stock split-retained earnings s Oriole Company Original Balance After Dividend After Split Paid-in capital Retained earnings Total stockholder's equity $ Shares outstanding 1. Stock dividend par value per share s 2. 2-for-1 stock split - par value per share$ Click if you would like to Show Work for this question: Modify Show Work LINK TO TEXT

Explanation / Answer

(a)

Stock dividend - Retained earnings: Retaied rarnings will be reduced by $3,393,000

Stock split - retained earnings = no change.

Retained earnings will be reduced by the value of stock dividend.

Stock dividend = 15% = 15% of 435,000 shares = 65,250 shares

Value of stock dividend = Makret value of 65,250 shares = 65,250 x $52 = $3,393,000

Stock split - Retained earnings

Tere will not be any effect on the retained earnings in the case of a stock split. Stock split involves a division of the par value of the share and issuing of new shares . It does not alter the financial position of the company.

For the case in question the 435,000 shares of common stock of $4 par will be converted to 870,000 shares of common stock of $2 par. The split formula is 2 for 1 i.e., 2 new shares for every 1 old share outstanding.

(b)Total shareholders' equity

(c) Par value per share

Stock dividend - Par value = $4.00

Stock split =$2.00

Original balance After dividend After split Paid in pcaital 5220000 8613000 5220000 Retained earnings 26100000 22707000 26100000 Total shareholders' equity 31320000 31320000 31320000 Shares outstanding 435000 500250 870000

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