On October 31, the equity section of Lucerne Company consists of share capital ordinary CHF300,000 and retained

Question:

On October 31, the equity section of Lucerne Company consists of share capital— ordinary CHF300,000 and retained earnings CHF900,000. Lucerne is considering the following two courses of action:

(1) Declaring a 5% share dividend on the 50,000, CHF6 par value shares outstanding, or

(2) Effecting a 2-for-1 share split that will reduce par value to CHF3 per share. The current market price is CHF13 per share.

Instructions
Prepare a tabular summary of the effects of the alternative actions on the components of equity, outstanding shares, and par value per share. Use the following column headings: Before Action, After Share Dividend, and After Share Split.

Dividend
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... Par Value
Par value is the face value of a bond. Par value is important for a bond or fixed-income instrument because it determines its maturity value as well as the dollar value of coupon payments. The market price of a bond may be above or below par,...

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