Exercise 11-15

On October 31, the stockholders equity section of Heins Company consists of common stock $370,000 and retained earnings $904,000. Heins is considering the following two courses of action: (1) declaring a 6% stock dividend on the 37,000, $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 $16 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 After After

Action Stock Stock

Dividend 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