1. Contrast a passive dividend policy with an active one. (Marks 04)

2. The Klingon Fastener Company has the following shareholders equity account:

Common stock ($8 par value) $ 2,000,000

Additional paid-in capital 1,600,000

Retained earnings 8,400,000

Total shareholders equity $12,000,000

The current market price of the stock is $60 per share.

Required: What will happen to this account and to the number of shares outstanding with (1) a

10 percent stock dividend? (2) 60 percent stock dividend (3) a 2-for-1 stock split.