Question
Ivanhoe Company has had 4 years of record earnings. Due to this success, the market price of its 515,000 shares of $2 par value common
Ivanhoe Company has had 4 years of record earnings. Due to this success, the market price of its 515,000 shares of $2 par value common stock has increased from $15 per share to $52. During this period, paid-in capital remained the same at $3,090,000. Retained earnings increased from $2,317,500 to $15,450,000. CEO Don Ames is considering either (1) a 15% stock dividend or (2) a 2-for-1 stock split. He asks you to show the before-and-after effects of each option on (a) retained earnings, (b) total stockholders equity, and (c) par value per share. (a)
1. | Stock dividend - retained earnings | $enter a dollar amount | ||
---|---|---|---|---|
2. | 2-for-1 stock split - retained earnings | $enter a dollar amount |
(b)
Ivanhoe Company | ||||||
---|---|---|---|---|---|---|
Original Balance | After Dividend | After Split | ||||
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 dollar amount | $enter a dollar amount | $enter a dollar amount | |||
Shares outstanding | enter a number of shares | enter a number of shares | enter a number of shares |
(c)
1. | Stock dividend - par value per share | $enter a dollar amount | ||
---|---|---|---|---|
2. | 2-for-1 stock split - par value per share | $enter a dollar amount |
1. Stock dividend - retained earnings $ 2. 2-for-1 stock split - retained earnings $ (b) Ivanhoe Company Original Balance After Dividend After Split Paid-in capital $ Retained earnings Total stockholder's equity $ Shares outstanding 1. Stock dividend - par value per share $ 2. 2-for-1 stock split - par value per share $
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