Exercise 11-7

On October 31, the stockholders equity section of Oriole Companys balance sheet consists of common stock $336,000 and retained earnings $394,000. Oriole is considering the following two courses of action:

(1)		Declaring a 6% stock dividend on the 84,000 $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 $14 per share. Prepare a tabular summary of the effects of the alternative actions on the companys stockholders equity and outstanding shares.

2- On October 31, the stockholders equity section of Blossom Companys balance sheet consists of common stock $501,000 and retained earnings $412,000. Blossom is considering the following two courses of action: (1) Declaring a 5% stock dividend on the 83,500 $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 $18 per share. Prepare a tabular summary of the effects of the alternative actions on the companys stockholders equity and outstanding shares.