Question
Blossom Company has had 4 years of record earnings. Due to this success, the market price of its 370,000 shares of $2 par value common
Blossom Company has had 4 years of record earnings. Due to this success, the market price of its 370,000 shares of $2 par value common stock has increased from $15 per share to $51. During this period, paid-in capital remained the same at $2,220,000. Retained earnings increased from $1,665,000 to $11,100,000. CEO Don Ames is considering either (1) a 15% stock dividend or (2) a 2-for-1 stock split. He asks you to show the before-and-after effects of each option on (a) retained earnings, (b) total stockholders equity, and (c) par value per share.
1. Stock dividend - retained earnings s 2. 2-for-1 stock split retained earnings Blossom Company Original Balance After Dividend After Split Paid-in capital Retained earnings Total stockholder's equity Shares outstanding 1. Stock dividend - par value per share s 2. 2-for-1 stock split par value per shareStep by Step Solution
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