The board of Wicker Home Health Care, Inc., is exploring ways to expand the number of shares outstanding in an effort to reduce the market price per share to a level that the firm considers more appealing to investors. The options under consideration are a 10 % stock dividend and, alternatively, a 5-for-4 stock split. At the present time, the firm's equity account and other per-share information are given as follows:
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Stock dividend versus stock split-Firm The board of Wicker Home Health Care, Inc., is exploring ways to expand the number of shares autstanding in an effort to reduce the market price per share to a level that the firm considers more appealing to investors. The options under consideration are a 10 % stock dividend and, allernatively, a 5-for-4 slock split. At the present time, the firm's equity account and ofther per-share information are given as follows: a. Show the effect on the equity accounts and per-share data of a 10% stock dividend b. Show the effect on the equity acoounts and per-share data of a 5-for-4 stock split. c. Which option will accomplish Wicker's goal of reducing the current stock price while maintaining a stable level of retained eamings? d. What legal constraints might encourage the firm to choose a stock split over a stock dividend? $ 0 Preferred Stock Common Stock (200,000 shares at $1 par) Paid-in capital in excess of par Retained Earnings 200,000 600,000 920,000 Total Stockholders' equity S1,720,000 $31 $3.50 $1.33 Price per share Earnings per share Dividend per share b. Show the effect on the equity accounts and per-share data of a 5-for-4 stock split. a. Show the effect on the equity accounts and per-share data of a 10 % stock dividend. The number of shares of common stock after the split isshares. (Round to the nearest whole number.) The number of shares of common stock after the dividend is shares. (Round to the nearest whole number.) The balance in the common stock account after the split is S (Round to the nearest dollar.) The balance in the common stock account after the dividend is S (Round to the nearest dollar.) The balance in the paid-in capital in excess of par account after the split is S (Round to the nearest dollar.) The balance in the paid-in capital in excess of par account after the dividend is $ (Round to the nearest dollar.) The balance in the retained earnings account after the split is $(Round to the nearest dollar.) The balance in the retained eamings account after the dividend is $ (Round to the nearest dollar.) The price per share of oommon stock after the split is $ (Round to the nearest cent) The price per share of common stock after the dividend is S (Round to the nearest cent.) The earnings per share (EPS) after the split is $ (Round to the nearest cent.) The eanings per share (EPS) after the dividend is (Round to the nearest cent.) c. Which option will accomplish Wicker's goal of reducing the current stock price while maintaining a stable level of retained earnings? (Select the best answer below.) O A. The option in part a, the stock dividend, willl accomplish the goal of reducing the stock price while mainlaining a stable level of retained earnings. O B. The option in part b, the stock split, will accomplish the goal of reducing the stock price while maintaining a stable level of retained earnings. d. What legal constraints might encourage the firm to choose a stock split over a stock dividend? (Select the best answer below.) A. The firm may be restricted in the number of shares it could issue. O B. There would be no legal oonstraint to encourage the firm to choose a stock split over a stock dividend. O C. The firm may be restricted in the amount of cash it holds. O D. The firm may be restricted in the amount of retained eamings available for dividend payments, whether cash or stock dividends. Stock dividend versus stock split-Firm The board of Wicker Home Health Care, Inc., is exploring ways to expand the number of shares autstanding in an effort to reduce the market price per share to a level that the firm considers more appealing to investors. The options under consideration are a 10 % stock dividend and, allernatively, a 5-for-4 slock split. At the present time, the firm's equity account and ofther per-share information are given as follows: a. Show the effect on the equity accounts and per-share data of a 10% stock dividend b. Show the effect on the equity acoounts and per-share data of a 5-for-4 stock split. c. Which option will accomplish Wicker's goal of reducing the current stock price while maintaining a stable level of retained eamings? d. What legal constraints might encourage the firm to choose a stock split over a stock dividend? $ 0 Preferred Stock Common Stock (200,000 shares at $1 par) Paid-in capital in excess of par Retained Earnings 200,000 600,000 920,000 Total Stockholders' equity S1,720,000 $31 $3.50 $1.33 Price per share Earnings per share Dividend per share b. Show the effect on the equity accounts and per-share data of a 5-for-4 stock split. a. Show the effect on the equity accounts and per-share data of a 10 % stock dividend. The number of shares of common stock after the split isshares. (Round to the nearest whole number.) The number of shares of common stock after the dividend is shares. (Round to the nearest whole number.) The balance in the common stock account after the split is S (Round to the nearest dollar.) The balance in the common stock account after the dividend is S (Round to the nearest dollar.) The balance in the paid-in capital in excess of par account after the split is S (Round to the nearest dollar.) The balance in the paid-in capital in excess of par account after the dividend is $ (Round to the nearest dollar.) The balance in the retained earnings account after the split is $(Round to the nearest dollar.) The balance in the retained eamings account after the dividend is $ (Round to the nearest dollar.) The price per share of oommon stock after the split is $ (Round to the nearest cent) The price per share of common stock after the dividend is S (Round to the nearest cent.) The earnings per share (EPS) after the split is $ (Round to the nearest cent.) The eanings per share (EPS) after the dividend is (Round to the nearest cent.) c. Which option will accomplish Wicker's goal of reducing the current stock price while maintaining a stable level of retained earnings? (Select the best answer below.) O A. The option in part a, the stock dividend, willl accomplish the goal of reducing the stock price while mainlaining a stable level of retained earnings. O B. The option in part b, the stock split, will accomplish the goal of reducing the stock price while maintaining a stable level of retained earnings. d. What legal constraints might encourage the firm to choose a stock split over a stock dividend? (Select the best answer below.) A. The firm may be restricted in the number of shares it could issue. O B. There would be no legal oonstraint to encourage the firm to choose a stock split over a stock dividend. O C. The firm may be restricted in the amount of cash it holds. O D. The firm may be restricted in the amount of retained eamings available for dividend payments, whether cash or stock dividends
