Question
On October 31, the stockholders' equity section of Cullumber Company consists of common stock $370,000and retained earnings $904,000. Cullumber is considering the following two courses
On October 31, the stockholders' equity section of Cullumber Company consists of common stock $370,000and retained earnings $904,000. Cullumber is considering the following two courses of action: (1) declaring a6% stock dividend on the37,000, $10par value shares outstanding, or (2) effecting a 2-for-1 stock split that will reduce par value to $5per share. The current market price is $16per share.
For the Common Stock after dividend I am coming up with
37,000*.06*10 = 22,200
This would make in excess of par 8,880 (37000*.06*14 = 31,080) (31,080-22,200=8,880)
However, my lab is showing me that is incorrect and I do not know why.
Can you please show me what I am doing wrong? Thank you.
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