Sandhill Co. has had 4 years of record earnings. Due to this success, the market...
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Sandhill Co. has had 4 years of record earnings. Due to this success, the market price of its 455,000 shares of $4 par value common stock has increased from $14 per share to $54. During this period, paid-in capital remained the same at $5,460,000. Retained earnings increased from $4,095,000 to $27,300,000. CEO Don Ames is considering either (1) a 15% stock dividend or (2) a 2-for-1 stock split. He asks you to show the before-and-after effects of each option on (a) retained earnings, (b) total stockholders equity, and (c) par value per share.
(a)
1.
Stock dividend - retained earnings
$
2.
2-for-1 stock split - retained earnings
$
(b)
Sandhill Co.
Original Balance
After Dividend
After Split
Paid-in capital
$
$
Retained earnings
Total stockholders equity
$
$
$
Shares outstanding
(c)
1.
Stock dividend - par value per share
$
2.
2-for-1 stock split - par value per share
$
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