Marig old Enterprises is authorized to issue 1,000,000 shares of $6 par value common stock. Since incorporation, 550,000 shares have been issued. Currently, Marigold holds 40,000 of its own shares in treasury and has $3,500,000 in Retained Earnings. Marigold is considering the following three options:
(1) Declaring a 2:1 stock split
(2) Declaring a 15 percent stock dividend (current market price is $15 per share)
(3) Declaring a 1:2 stock split
(a) What is the current balance in the Common Stock account?
(b) How many shares of common stock are currently outstanding?
(c) For each of the three options Marigold is considering, determine the number of shares authorized, issued, outstanding, and in treasury after the declaration. Each option should be executed on the original information.
(d) What would be the balance in Retained Earnings if the (a) split and (b) dividend were chosen?
(e) Determine the par value per share and the balance in the Common Stock account under each of the options.
(f) What would you expect to happen to the market price per share of Marigold common stock if each of the three options were chosen? Explain the rationale for your answer.

  • CreatedMarch 27, 2015
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