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On October 31, the stockholders' equity section of Sheridan Company's balance sheet consists of common stock $582,000 and retained earnings $407,000. Sheridan is considering the
On October 31, the stockholders' equity section of Sheridan Company's balance sheet consists of common stock $582,000 and retained earnings $407,000. Sheridan is considering the following two courses of action: (1) Declaring a 6% stock dividend on the 97,000 $6 par value shares outstanding (2) Effecting a 2-for-1 stock split that will reduce par value to $3 per share. The current market price is $18 per share. Prepare a tabular summary of the effects of the alternative actions on the company's stockholders' equity and outstanding shares. Sheridan Company's Balance Sheet Before Action After Stock DividendAfter Stock Split Stockholders' equity Paid-in capital Retained earnings 582,000 616,920 $1164000 407,000 407,000 Total stockholders' equity 989,000 1,023,920 989,000 Outstanding shares 97,000 102,820 205640
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