FINANCIAL ACCOUNTING:TOOLS FOR BUSINESS
FINANCIAL ACCOUNTING:TOOLS FOR BUSINESS
19th Edition
ISBN: 9781119493624
Author: Kimmel
Publisher: WILEY
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Chapter 11, Problem 11.3bDIE

 (a) (1)

To determine

Stock Dividends:  It refers to the payment of the dividend to its shareholders by the corporation in the form of shares rather than cash is referred as stock dividend.

Stock Splits: It is a method of increasing the total number of outstanding shares thereby, reducing the market price of each share, however, keeping the corporation’s total market value constant.

To Show: the effect of 15% stock dividend issue on retained earnings for Company S before and after stock dividend issue.

 (2)

To determine

To Show: the effect of stock split on retained earnings for Company S before and after stock split.

(b) 1.

To determine

To Show: the effect of 15% stock dividend issue on stockholders’ equity for Company S before and after stock dividend issue.

(2)

To determine

To Show: the effect of stock split on stockholders’ equity for Company S before stock split

To determine

To Show: the effect of stock split on stockholders’ equity for Company S after stock split.

(c) (1)

To determine

To show: the effect of 15% stock dividend on par value per share.

(2)

To determine

To show: the effect of stock split on par value per share.

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Cullumber Company has had 4 years of record earnings. Due to this success, the market price of its 500,000 shares of $2 par value common stock has increased from $14 per share to $53. During this period, paid-in capital remained the same at $3,000,000. Retained earnings increased from $4,500,000 to $30,000,000. CEO Don Ames is considering either (1) a 15% stock dividend or (2) a 2-for-1 stock split. He asks you to show the before-and-after effects of each option on (a) retained earnings, (b) total stockholders' equity, and (c) par value per share. (a) 1. 2. (b) Paid-in capital Stock dividend - retained earnings Retained earnings 2-for-1 stock split - retained earnings (c) Total stockholders' equity $ Shares outstanding 1. 2. $ Stock dividend - par value per share $ Original Balances 2-for-1 stock split - par value per share $ $ $ $ After Dividend $ $ After Split
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