Exercise 11-7 On October 31, the stockholders equity section of Pele Companys balance sheet consists of common stock $597,600 and retained earnings $443,000.

Pele is considering the following two courses of action:

(1) Declaring a 5% stock dividend on the 99,600 $6 par value shares outstanding

(2) Effecting a 2-for-1 stock split that will reduce par value to $3 per share.

The current market price is $15 per share. Prepare a tabular summary of the effects of the alternative actions on the companys stockholders equity and outstanding shares.

Pele Companys

Balance Sheet

BEFORE ACTION AFTER STOCK DIVIDEND AFTER STOCK SPLIT

Stockholders equity

Paid in capital $___________ $________________ $_____________

Retained earnings $____________ $________________ $_____________

____________________________________________________________

Total stockholders $___________ $________________ $_____________

Equity

Outstanding shares ____________ _________________ ______________