In the previous problem, suppose the company instead decides on a 5-for-1 stock split. The firm’s 74 cent per share cash dividend on the new (post-split) shares represents an increase of 10 percent over last year’s dividend on the pre-split stock. What effect does this have on the equity accounts? What was last year’s dividend per share?

Data from Previous Problem

The company with the common equity accounts shown here has declared a stock dividend of 12 percent at a time when the market value of its stock is $73 per share. What effects on the equity accounts will the distribution of the stock dividend have?

Common stock ($1 par value) .......$ 120,000
Capital surplus ...................................912,300
Retained earnings ..........................2,347,200
Total owners’ equity ....................$3,379,500