On October 31, the stockholders’ equity section of Cullumber Company’s balance s

Question

On October 31, the stockholders’ equity section of Cullumber Company’s balance sheet consists of common stock $513,000 and retained earnings $414,000. Cullumber is considering the following two courses of action:
(1) Declaring a 6% stock dividend on the 85,500 $6 par value shares outstanding (2) Effecting a 2-for-1 stock split that will reduce par value to $3 per share.
The current market price is $14 per share.

Prepare a tabular summary of the effects of the alternative actions on the company’s stockholders’ equity and outstanding shares. Cullumber Company's Balance Sheet Before Action After Stock Dividend After Stock Split Stockholders' equity Paid-in capital 513000 507870 513000 Retained earnings 414000 408870 414000 Total stockholders' equity 927000 916740 927000 Outstanding shares 85500

Explanation / Answer

Before Action After Stock Dividend After Stock Split Stockholders equity    Paid-in capital 513000 584820 513000    Retained earnings 414000 342180 414000 Total stockholders equity   927000 927000 927000 Outstanding shares 85500 90630 171000

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