On October 31, the stockholders\' equity section of Sheridan Company\'s balance

Question

On October 31, the stockholders' equity section of Sheridan Company's balance sheet consists of common stock $344,000 and retained earnings $396,000. Sheridan is considering the following two courses of action: (1) Declaring a 7% stock dividend on the 86,000 $4 par value shares outstanding (2) Effecting a 2-for-1 stock split that will reduce par value to $2 per share The current market price is $17 per share. Prepare a tabular summary of the effects of the alternative actions on the company's stockholders' equity and outstanding shares. Sheridan Company's Balance Sheet Before Action After Stock Dividend After Stock Split Stockholders' equity Paid-in capital Retained earnings Total stockholders' equity s Outstanding shares

Explanation / Answer

Prepar tabular summary of the effects of the alternative actions on the company;s stockholder's equity and outstanding shares

Before Action After stock dividend After stock split Stockholder's equity Paid in capital 344000 446340 344000 Retained earnings 396000 293660 396000 Total stockholder's equity 740000 740000 740000 Outstanding shares 86000 92020 172000

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