Question 2.

The Western Pipe Company has the following capital section in its balance sheet. Its stock is currently selling for $6 per share. Common stock (70,000 shares) $140, 000 Retained earnings 160,000 $300, 000 The firm intends to first declare a 15 percent stock dividend and then pay a $0.20 cash dividend (which also causes a reduction of retained earnings). Show the capital section of the balance sheet after the first transaction and then after the second transaction. Western Pipe Company After 135 transaction Common stock (80 , 500 shares) Retained earnings Western Pipe Company After 2 0 transaction Common stock (80 , 500 shares) Retained earnings