At the end of 20X6, Home Ltd. reported the following in shareholders equity:

Common shares, no-par value; authorized, unlimited shares; issued, 14,810,000 shares	$	19,333,000
Retained earnings		53,220,000
	$	72,553,000

At this time, the shares were trading in the range of $4 to $6 per share on public stock markets. The companys board of directors is contemplating two alternative courses of action:

1. Declaring a 50% stock dividend, or
2. Executing a 3-for-2 stock split.

Required: 1. Prepare the shareholders equity section for each alternative, assuming that market value is used to capitalize the stock dividend.

2. What would the expected share price be assuming a share price of $4 for alternative 1 and a share price of $6 for alternative 2? (Round your answers to 2 decimal places.)

3-a. Which alternative would shareholders prefer?

1. DECLERING A 50% STOCK DIVIDEND

2. EXECUTING A 3 FOR 2 STOCK SPLIT

3. SHAREHOLDERS ARE INDIFFRENT IN BOTH SITUATIONS

3-b. Not available in Connect. 4. Which alternative would the company prefer?

1. DECLERING A 50% STOCK DIVIDEND

2. EXECUTING A 3 FOR 2 STOCK SPLIT

3. SHAREHOLDERS ARE INDIFFRENT IN BOTH SITUATIONS