In the previous problem, suppose the company instead decides on a five-for-one stock split. The firm’s 85 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?

In the Previous Problem
Common stock ($1 par value)..................................$ 130,000
Capital surplus..............................................................979,000
Retained earnings.....................................................2,865,500
Total owners’ equity...............................................$3,974,500