Sammy's Sportshops has been very profitable in recent years and has seen its stock price steadily increase to over $100 per share. The CFO thinks the company should consider either a 100% stock dividend or a 2-for-1 stock split.

Required:

1. Complete the following chart comparing the effects of a 100% stock dividend versus a 2-for-1 stock split on the stockholders' equity accounts, shares outstanding, par value, and share price.

2. What is the primary reason companies declare a large stock dividend or a stock split?

Transcribed Image Text:

After 100% Stock Dividend After 2-for-1 Stock Split Before S 1,000 49,000 50,000 Common stock, $1 par value Additional paid-in capital Total paid-in capital Retained earnings Total stockholders' equity Shares outstanding Par value per share Share price $72,850 1,000 $1