The condensed balance sheet of Laporte Corporation reports the following: LAPORTE CORPORATION Balance Sheet (partial) June 30,

Question:

The condensed of Laporte reports the following:
LAPORTE Sheet (partial)
June 30, 2014
Total assets..................................................................$12,000,000
Liabilities and shareholders' equity
Total liabilities...............................................................$ 4,000,000
Shareholders' equity
Common shares, unlimited number authorized, 400,000 issued........2,000,000
Retained earnings.............................................................6,000,000
Total shareholders' equity...................................................8,000,000
Total liabilities and shareholders' equity...............................$12,000,000
The market price of the common shares is currently $30 per share. Laporte wants to assess the impact of three possible alternatives on the and its shareholders. The alternatives are:
1. Payment of a $1.50 per share cash of a 5% stock A 3-for-2 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 a Laporte shareholder currently owns 1,000 common shares at a cost of $28,000. What is the impact of each alternative for the shareholder, assuming that the shares' market price changes proportionately with the alternative?
Taking It Further
What are the advantages and disadvantages to the company of a stock split?
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