On OCT $31,$ the stockholders' equity section of MCompany's balance sheet consists of common stock $$648,000$ and retained earnings $$400,000.$ MCompany is considering the following two courses of action:

$(1)$ declaring a $5\%$ stock dividend on the $81,000$$$8$ par value shares outstanding or

$(2)$ effecting a $2-$for$-1$ stock split that will reduce par value to $$4$ per share.

The current market price is $$17$ per share.

Instructions

Prepare a tabular summary of the effects of the alternative actions on the company's stockholders' equity and outstanding shares. Use these column headings: Before Action, After Stock Dividend, and After Stock Split.

$\backslash$table$[[,$Before Action,$\backslash$table$[[$After Stock$],[$Dividend$]],\backslash$table$[[$After Stock$],[$Split$]]],[$Stockholders$\text{'}$ equity:$],[$Paid$-$in Capital,$$648,000,,],[$Retained Earnings,$400,000,,],[$Total Stockholders Equity,$$1,048,000,,],[$Outstanding Shares,$81,000,,]]$

$(1)$ By choosing stock dividend, you will be distributing $5\%$ additional shares over the $81,000$ shares "before the action". The "paid$-$in capital" of the stock dividend is calculated as the number of new shares $...$ times par OR times market? Remember that issuing new shares reduces retained eamings by number of new shares times par OR market?

$(2)$ By choosing the stock$-$split you "call in$"$ the existing outstanding shares of stock from your investors and issue $2x$ that number of "new" shares back to the same investors. They get $2$ "new" shares for every one that was "called in$".$ BUT, does the paid$-$in capital calculation for the new shares use the $$8$ par $...$ OR double $$8$ par OR $\frac{1}{2}$ the $$8$ par?