derina the stockholders\' equity section af Cu umber Company\'s balance sheet co
ID: 341820 • Letter: D
Question
derina the stockholders' equity section af Cu umber Company's balance sheet consists o common stock $558 000 and retained earnings03,000. Cullumber is considering the following two courses af action: On October 31, (1) Declaring a á% stock dividend on the3,DOD SD par value shares outstanding (2) Effacting a 2-for-1 stock split that will reduce par valuc to $3 per shara Tha 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. Balance Sheet Before Action After Stock Dividend After Stock Split Stockholders equity Paid-in capital Retained earnings Total stockholders equity Outstanding sharesExplanation / Answer
Answer
No. of shares
Amount
6% stock dividend=
5580 shares
[5580 x $6] $33480
Old balance of common stock shares
93000
$558000
Total shares before split
98580
$591480
Split ratio
02:01
No. of shares after split
[98580 x 2] 197160
Before Action
After Stock dividend
After Stock Split
Stockholder's Equity:
Paid In Capital
[93000 x $6] 558000
[98580 x $6] 591480
[197160 x $3] 591480
Retained Earnings
403000
403000
40300
Total Stockholder's Equity
961000
994480
631780
Outstanding shares
93000
98580
197160
No. of shares
Amount
6% stock dividend=
5580 shares
[5580 x $6] $33480
Old balance of common stock shares
93000
$558000
Total shares before split
98580
$591480
Split ratio
02:01
No. of shares after split
[98580 x 2] 197160
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