On April 26, 1990, Quantum Chemical Corporation declared a 2 percent stock dividend. After the stock dividend, the number of shares outstanding increased to approximately 27.54 million. Assume that the stock dividend was declared and paid on the same day. REQUIRED:

a. How many shares of stock were outstanding prior to the dividend?

b. The market price of the stock was $20 per share and the par value was $2.50 per share on the day the dividend was declared and paid. Provide the journal entry to record the distri¬ bution.

c. Compute the value of Quantum Chemical if all outstanding shares, prior to the stock div¬ idend, could have been sold for $20 each. Using this value, compute the per-share value of the company’s outstanding share after the stock dividend.

d. Assume that Mr. Jones owned 0.9 million shares prior to the stock dividend. How many shares did Mr. Jones own after the stock dividend? What percent of the company did Mr. Jones own before and after the stock dividend? What was the value of Mr. Jones’ total shareholdings before and after the stock dividend based on the amounts from part (c)?

e. Does a stock dividend actually represent an economic exchange between a corporation and its shareholders? Why or why not?

f. Provide several reasons why a company would issue a stock dividend.