RBC Financial Group provides personal and commercial banking, wealth management services, insurance, corporate and investment banking, and transaction processing services on a global basis. On March 3, 2006, a press release announced the following:

Royal Bank of Canada (RY: TSX, NYSE, SWX) today announced that its Board of Directors has declared a stock dividend, which has the same effect as a two-for-one split of its common shares. RBC's last stock dividend was paid on October 5, 2000.

The Board of Directors today also declared a quarterly common share cash dividend of \(\$ 0.72\) per share, which represents \(\$ 0.36\) per share on a post-stock dividend basis. This dividend of \(\$ 0.36\) per share is payable on May 24, 2006, to common shareholders of record on April 25, 2006.

\section*{Required:}

1. Prepare any journal entries that RBC Financial should make as the result of information in the preceding report. Assume that the company has 1.3 million shares outstanding with a market value of \(\$ 47\) per share and an average issue price of \(\$ 5.60\).

2. What do you think happened to the company's stock price after the March 3 announcement?

3. What factors did the board of directors consider in making this decision?