Kosco 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

$6 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 Al Dryer is considering either (1) a 15% stock dividend or (2) a 2-for-1 stock split. He asks you to show the beforeand-

after effects of each option on

(a) retained earnings and

(b) total stockholders’ equity.

AppendixLO1