The board of Wicker Home Health Care, Inc., is exploring ways to expand the number of shares outstanding in an effort to reduce the market price per share to a level that the firm considers more appealing to investors. The options under consideration are a 10% stock dividend and, alternatively, a 5-for-4 stock split. At the present time, the firm's equity account and other per-share information are given as follows (SEE ATTACHED TABLE) a. Show the effect on the equity accounts and per-share data of a 10% stock dividend. b. Show the effect on the equity accounts and per-share data of a 5-for-4 stock split. c. Which option will accomplish Wicker's goal of reducing the current stock price while maintaining a stable level of retained earnings? d. What legal constraints might encourage the firm to choose a stock split over a stock
The board of Wicker Home Health Care, Inc., is exploring ways to expand the number of shares outstanding in an effort to reduce the market price per share to a level that the firm considers more appealing to investors. The options under consideration are a 10% stock dividend and, alternatively, a 5-for-4 stock split. At the present time, the firm's equity account and other per-share information are given as follows (SEE ATTACHED TABLE) a. Show the effect on the equity accounts and per-share data of a 10% stock dividend. b. Show the effect on the equity accounts and per-share data of a 5-for-4 stock split. c. Which option will accomplish Wicker's goal of reducing the current stock price while maintaining a stable level of retained earnings? d. What legal constraints might encourage the firm to choose a stock split over a stock
Financial Accounting: The Impact on Decision Makers
10th Edition
ISBN:9781305654174
Author:Gary A. Porter, Curtis L. Norton
Publisher:Gary A. Porter, Curtis L. Norton
Chapter11: Stockholders' Equity
Section: Chapter Questions
Problem 11.12E
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The board of Wicker Home Health Care, Inc., is exploring ways to expand the number of shares outstanding in an effort to reduce the market price per share to a level that the firm considers more appealing to investors. The options under consideration are a 10% stock dividend and, alternatively, a 5-for-4 stock split. At the present time, the firm's equity account and other per-share information are given as follows (SEE ATTACHED TABLE)
a. Show the effect on the equity accounts and per-share data of a 10% stock dividend.
b. Show the effect on the equity accounts and per-share data of a 5-for-4 stock
split.
c. Which option will accomplish Wicker's goal of reducing the current stock price while maintaining a stable level of retained earnings?
d. What legal constraints might encourage the firm to choose a stock split over a stock
dividend?
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