Magna CD Company has had 4 years of record earnings. Due to this success, the market price

Question:

Magna CD Company has had 4 years of record earnings. Due to this success, the market price of its 400,000 shares of $2 par value common stock has increased from $12 per share to $50. During this period, paid-in capital remained the same at $2,400,000. Retained earnings increased from $1,800,000 to $12,000,000. CEO Ed Bette 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.

Common Stock
Common stock is an equity component that represents the worth of stock owned by the shareholders of the company. The common stock represents the par value of the shares outstanding at a balance sheet date. Public companies can trade their stocks on... Dividend
A dividend is a distribution of a portion of company’s earnings, decided and managed by the company’s board of directors, and paid to the shareholders. Dividends are given on the shares. It is a token reward paid to the shareholders for their... Par Value
Par value is the face value of a bond. Par value is important for a bond or fixed-income instrument because it determines its maturity value as well as the dollar value of coupon payments. The market price of a bond may be above or below par,...