Stock Dividends versus Stock Splits Campbell Company wants to increase the number of shares of its common stock outstanding and is considering a stock dividend versus a stock split. The Stockholders’

Equity section of the fi rm’s most recent balance sheet appeared as follows:

Common stock, $10 par, 50,000 shares issued and outstanding $ 500,000 Additional paid-in capital 750,000 Retained earnings 880,000 Total stockholders’ equity $2,130,000 If a stock dividend is chosen, the fi rm wants to declare a 100% stock dividend. Because the stock dividend qualifi es as a “large stock dividend,” it must be recorded at par value.

If a stock split is chosen, Campbell will declare a 2-for-1 split.

Required 1. Compare the effects of the stock dividends and stock splits on the accounting equation.

2. Develop the Stockholders’ Equity category of Campbell’s balance sheet

(a) after the stock dividend and

(b) after the stock split.

AppendixLO1