On December 31, 2017, Nehpton Ltd. reported $3 million of

On December 31, 2017, Nehpton Ltd. reported $3 million of common shares and $6 million of retained earnings. On that date, the company had five million shares authorized and two million outstanding. Management is considering a 10 percent stock dividend or a two-for-one stock split and would like to know the impact on the equity section of the two transactions.


a. Prepare the equity section of Nehpton’s balance sheet under the following conditions:

i. As originally reported;

ii. If management declared a 10 percent stock dividend;

iii. If management declared a two-for-one stock split.

b. Explain how earnings per share would be affected in each case. Which situation would be most attractive to the shareholders?

Balance Sheet
Balance sheet is a statement of the financial position of a business that list all the assets, liabilities, and owner’s equity and shareholder’s equity at a particular point of time. A balance sheet is also called as a “statement of financial...
A dividend is a distribution of a portion of company’s earnings, decided and managed by the company’s board of directors, and paid to the shareholders. Dividends are given on the shares. It is a token reward paid to the shareholders for their...


  • Access to 1 Million+ Textbook solutions
  • Ask any question from 24/7 available


Get help from Accounting Tutors
Ask questions directly from Qualified Online Accounting Tutors .
Best for online homework instance.