Question
Blossom Company has had 4 years of record earnings. Due to this success, the market price of its360,000shares of $2par value common stock has increased
Blossom Company has had 4 years of record earnings. Due to this success, the market price of its360,000shares of $2par value common stock has increased from $12per share to $51. During this period, paid-in capital remained the same at $2,160,000. Retained earnings increased from $1,620,000to $10,800,000. CEO Don Ames is considering either (1) a15% 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.
(a)
- Stock dividend =
- 2-for-1 stock split =
(b)
Blossom Company
Original Balance | After Dividend | After Split
Paid-in capital
Retained earnings
Total stockholder's equity
Shares outstanding
(c)
1. Stock dividend =
2. 2-for-1 stock split =
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