CASE 4 (20 points)

The owners equity accounts for Vera Corporation are shown here:

Common stock (2 par value) 100,000

Capital surplus 860,000

Retained earnings 2,570,800

Total owners equity 3,530,800

Instructions:

1. If the companys stock currently sells for 64 per share and a 20 percent stock dividend is declared, how many new shares will be distributed? Show how the equity accounts would change. (10 points)

2. Assume that instead of a stock dividend, the company declares a four-for-one stock split. How the equity accounts will change? How many shares are outstanding now? What is the new par value per share? (10 points)