Exercise 11-7

On October 31, the stockholders equity section of Carla Vista Co.s balance sheet consists of common stock $352,000 and retained earnings $398,000. Carla Vista is considering the following two courses of action:

(1)		Declaring a 6% stock dividend on the 88,000 $4 par value shares outstanding
(2)		Effecting a 2-for-1 stock split that will reduce par value to $2 per share.

The current market price is $16 per share. Prepare a tabular summary of the effects of the alternative actions on the companys stockholders equity and outstanding shares.

Carla Vista Co.s Balance Sheet
		Before Action		After Stock Dividend		After Stock Split
Stockholders equity
Paid-in capital		$enter a dollar amount		$enter a dollar amount		$enter a dollar amount
Retained earnings		enter a dollar amount		enter a dollar amount		enter a dollar amount
Total stockholders equity		$enter a total of the two previous amounts		$enter a total of the two previous amounts		$enter a total of the two previous amounts
Outstanding shares		enter a number of shares		enter a number of shares		enter a number of shares

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