The condensed balance sheet of Erickson Corporation reports the following:

The market price of the common shares is currently $30 per share. Erickson wants to assess the impact of three possible alternatives on the corporation and its shareholders. The alternatives are:
1. Payment of a $1.50 per share cash dividend
2. Distribution of a 5% stock dividend
3. A 2-for-1 stock split
Instructions
(a) For each alternative, determine the impact on (1) assets, (2) liabilities, (3) common shares, (4) retained earnings, (5) total shareholders' equity, and (6) the number of shares.
(b) Assume an Ericks on shareholder currently owns 2,000 common shares at a cost of $50,000. What is the impact of each alternative for the shareholder, assuming that the market price of the shares changes proportionately with the alternative?
TAKING IT FURTHER
What is the purpose of a reverse stock split? When might a company take this action?

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ERICKSON CORPORATION Balance Sheet (partial) January 31,2017 Total assets $9,000,000 Liabilities and shareholders' equity Liabilities Shareholders' equity $2,500,000 Common shares, unlimited number authorized, 500,000 issued Retained earnings $3,000,000 3,500,000 6,500,000 $9,000,000 Total liabilities and shareholders' equity