On October 31, the equity section of Lucerne AG consists of share capitalordinary CHF500,000 and retained earnings
Question:
On October 31, the equity section of Lucerne AG consists of share capital—ordinary CHF500,000 and retained earnings CHF900,000. Lucerne is considering the following two courses of action: (1) declaring a 5% share dividend on the 50,000, CHF10 par value shares outstanding, or (2) effecting a 2-for-1 share split that will reduce par value to CHF5 per share. The current market price is CHF14 per share.
Instructions
Prepare a tabular summary of the effects of the alternative actions on the components of equity, outstanding shares, and par value per share. Use the following column headings: Before Action, After Share Dividend, and After Share Split.
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,...
Step by Step Answer:
Before Action After Share Dividend After Share Split Equity Share capita...View the full answer
Accounting Principles
ISBN: 978-1119419617
IFRS global edition
Authors: Paul D Kimmel, Donald E Kieso Jerry J Weygandt
