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On October 31 the stockholders' equity section of Lynch Company's balance sheet consists of common stock $648,000 and retained earnings $400,000. Lynch is considering the
On October 31 the stockholders' equity section of Lynch Company's balance sheet consists of common stock $648,000 and retained earnings $400,000. Lynch 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 $14 per share. Complete the tabular summary of the effects of the alternative actions on the company's stockholders' equity, outstanding shares. ..................Before Action ...................After Stock Dividend ................After Stock Split Stockholders' equity Paid-in capital ........... 648000... ............____?...........648000 Retained earnings ......400000 ..............______?..........400000 Total stockholders' equity1048000.........1048000....... $ 1048000 Outstanding shares.....___?........____?.......____
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