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Squash Delight Inc. has the following balance sheet: Assets Cash $ 70,000 Accounts receivable 348,000 Fixed assets 960,000 Total assets $ 1,378,000 Liabilities Accounts payable

Squash Delight Inc. has the following balance sheet:

Assets
Cash $ 70,000
Accounts receivable 348,000
Fixed assets 960,000
Total assets $ 1,378,000
Liabilities
Accounts payable $ 276,000
Notes payable 52,000
Common stock (100,000 shares @ $2 par) 200,000
Capital in excess of par 100,000
Retained earnings 750,000
Total liabilities & owners' equity $ 1,378,000

The firms stock sells for $14 a share. a. Show the effect on the capital accounts of a two-for-one stock split. (Do not round intermediate calculations and round your answers to the nearest whole dollar.)

Effect of Stock Split
Common stock $200,000
Capital excess of par $100,000
Retained earnings $750,000
Total equity $1,050,000

b. Show the effect on the capital accounts of a 10 percent stock dividend. Part b is separate from part a. In part b do not assume the stock split has taken place. (Do not round intermediate calculations and round your answers to the nearest whole dollar.)

Effect of Stock Dividend
Common stock $220,000
Capital excess of par
Retained earnings
Total equity $220,000

c. Based on the balance in retained earnings, which of the two dividend plans is more restrictive on future cash dividends?

Stock split
Stock dividend

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