Firm Mammoth Corporation is considering a 3-for-2 stock split. It currently has the stockholders' equity position shown. The current stock price is $120 per share. The most recent period's earnings available for common stock is included in retained earnings.

a. What effect on Mammoth's equity account would result from the stock

split?

b. What change in stock price would you expect to result from the stock split?

c. What is the maximum cash dividend per share that the firm could pay on common stock before and after the stock split? (Assume that legal capital includes all paid-in capital.)

d. Contrast your answers to parts a through c. with the circumstances surrounding a 50% stock

dividend.

e.Explain the differences between stock splits and stock dividends.

a.If the firm declares a 3-for-2 stock split, the new balance in the common stock account after the split is

$_____

(Round to the nearest dollar.)

Preferred stock	$ 1,000,000
Common stock (120 comma 000120,000 shares at $66 par)	720 comma 000720,000
Paid-in capital in excess of par	1,700,000
Retained earnings	Modifying 10 comma 000 comma 000 with underline 10,000,000
Total stockholders' equity	Modifying $ 13 comma 420 comma 000 with double underline$13,420,000