Chapter 11 Exercises

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On October 31, the stockholders equity section of Cullumber Company consists of common stock $250,000 and retained earnings $850,000. Cullumber is considering the following two courses of action: (1) declaring a 4% stock dividend on the 25,000, $10 par value shares outstanding, or (2) effecting a 2-for-1 stock split that will reduce par value to $5 per share. The current market price is $14 per share. Prepare a tabular summary of the effects of the alternative actions on the components of stockholders equity, outstanding shares, and par value per share.

		Before Action		After Stock Dividend		After Stock Split
Stockholders equity
Paid-in capital
Common stock		$		$		$
In excess of par
Total paid-in capital
Retained earnings
Total stockholders equity		$		$		$
Outstanding shares
Par value per share		$		$		$

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