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On 31 October the equity section of Sanders Ltd's statement of financial position consists of contributed equity $600 000 and retained earnings $200 000.
On 31 October the equity section of Sanders Ltd's statement of financial position consists of contributed equity $600 000 and retained earnings $200 000. Sanders Ltd is considering the following two courses of action: (1) declaring a 5% share dividend on the 60 000 $10 issued ordinary shares or (2) paying a cash dividend of $0.50 per share. If the company issues shares as dividend, the shares will have a nominal value of $10 each. Required: (a) Prepare a tabular summary of the effects of the alternative actions on the company's equity, the number of issued shares, and share capital. Use the table below. (b) Comment on any assumption made and which course of action you would advise Sanders Ltd to take. Original Balances After Share Dividend After Cash Dividend Share Capital Retained Earnings Total Equity Issued Shares (no.)
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