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Exercise 11-7

Exercise 11-7 On October 31, the stockholders? equity section of Pele Company?s balance sheet consists of common stock $388,800and retained earnings $434,500. Pele is considering the following two courses of action:

(1)	Declaring a6% stock dividend on the97,200$4par value shares outstanding
(2)	Effecting a 2-for-1 stock split that will reduce par value to $2per share.

The current market price is $13per share. Prepare a tabular summary of the effects of the alternative actions on the company?s stockholders? equity and outstanding shares.

Pele Company?s Balance Sheet
Before Action	After Stock Dividend	After Stock Split
Stockholders? equity
Paid-in capital	$	$	$
Retained earnings
Total stockholders? equity	$	$	$
Outstanding shares

Exercise 11-5 Exercise 11-7 On October 31, the stockholders' equity section of Pele Company's balance sheet consists of common stock $388,800 and retained earnings $434,500. Pele is considering the following two courses of action: (1) Declaring a 6% stock dividend on the 97,200 $4 par value shares outstanding (2) Effecting a 2-for-1 stock split that will reduce par value to $2 per share. The current market price is $13 per share. Prepare a tabular summary of the effects of the alternative actions on the company's stockholders' equity and outstanding shares. Pele Company's Balance Sheet After Stock Before Action Dividend After Stock Split Stockholders' equity $ Paid-in capital $ $ $ $ Retained earnings $ Total stockholders' equity Outstanding shares