On October 31 the stockholders' equity section of Sarah Lane Company's balance sheet consists of common stock \(\$ 800,000\) and retained earnings \(\$ 400,000\). Sarah is considering the following two courses of action: (1) declaring a \(10 \%\) stock dividend on the \(80,000 \$ 10\) par value shares outstanding or (2) effecting a 2 -for-1 stock split that will reduce par value to \(\$ 5\) per share. The current market price is \(\$ 15\) per share.

\section*{Instructions}

Prepare a tabular summary of the effects of the alternative actions on the components stockholders' equity, outstanding shares, and book value per share. Use these column headings: Before Action, After Stock Dividend, and After Stock Split.