LP&G Corporation has the following stockholders’equity at December 31, 1999:

Common stock: $20 par, authorized 700,000 shares, issued 200,000 shares $ 4,000,000 Additional paid-in capital 3,200,000 Total contributed capital 7,200,000 Retained earnings 5,400,000 Total stockholders’ equity $12,600,000 During 2000, the following transactions occurred:

1. January 31: A two-for-one common stock split was declared by the board of directors. The shares were issued and the market price was $110 per share.

2. March 15: The corporation repurchased 50,000 shares of its common stock as treasury stock at $54 per share.

3. May 31: The board of directors declared a $2 cash dividend per share.

4. June 10: This is the date of record that the board of directors established.

5. June 20: The dividends were paid.

6. August 30: The corporation granted employee stock options of 20,000 shares.

The market price was $54 per share. The exercise price is $54 per share.

7. October 15: The corporation sold 30,000 shares of its treasury stock for $55 per share.

8. November 25: Employee stock options were exercised. The market price was $56 per share.

Required

a. Set up an accounting equation and record the above transactions.

b. Why did the corporation issue a two-for-for stock split?

c. Why would a company issue a stock dividend instead of cash? What impact does a stock dividend have on overall stockholders’ equity?