Question
John is a shareholder of Carson Construction (Carson) and owns 100 shares of Carson. The board of directors of Carson recently announced a 20% stock
John is a shareholder of Carson Construction (Carson) and owns 100 shares of Carson. The board of directors of Carson recently announced a 20% stock dividend to all shareholders on record as of 30 Sept 2021. Assuming that Carson’s current stock price is RM30 per share and there are 1,000,000 shares of stock in an issue of RM1 par value and its earnings per share
(EPS) for last year was RM1.50.
i)Calculate the market capitalization and earnings per share of Carson before and after
the stock dividend.
ii) Based on the calculations in part (a) (i) above, explain the impact of the stock dividend on John’s own position and the market price of his stock investment in the company.
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Accounting Principles Volume 2
Authors: Jerry J. Weygandt, Donald E. Kieso, Paul D. Kimmel, Barbara Trenholm, Valerie Warren, Lori Novak
8th Canadian Edition
1119502551, 1-119-50255-5, 978-1119502555
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