At the end of 2004, ABC Limited reported the following in shareholder's equity: Common Shares, no-par value;
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Question:
At the end of 2004, ABC Limited reported the following in shareholder's equity:
Common Shares, no-par value; authorized, unlimited shares; issued 14,400,000 shares - $18,800,000
Retained Earnings - $52,840,000
SE Total - $71,640,000
At this time, the shares were trading in the range of $4 to $6 per share on the public stock market. ABC ltd.'s board of directors is deciding on two alternative courses of action:
1. Declaring a 50% stock dividend, or 2. Executing a 3 for 2 stock split
Required
- Prepare the shareholder's equity section for each alternative, assuming market value is used to capitalize the stock dividend.
- What would the expected share price be in each alternative?
- Which alternative would shareholder's prefer and why?
- Which alternative would ABC Ltd. prefer and why?
Related Book For
Intermediate Accounting Volume 2
ISBN: 9781119497042
12th Canadian Edition
Authors: Donald E. Kieso, Jerry J. Weygandt, Terry D. Warfield, Irene M. Wiecek, Bruce J. McConomy
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