Spears Company has had 4 years of record earnings. Due to this success, the market price...

  

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Spears Company has had 4 years of record earnings. Due to this success, the market price of its 400,000 shares of $2 par value common stock has increased from $6 per share to $50. During this period, paid-in capital remained the same at $2,400,000. Retained earnings increased from $1,800,000 to $12,000,000. CEO Don Ames is considering either (1) a 15% stock dividend or (2) a 2-for-1 stock split. He asks you to show the before-and-after effects of each option on (a) retained earnings, (b) total stockholders' equity, and (c) par value per share. (a) 1. 2. (b) Stock dividend-retained earnings 2-for-1 stock split - retained earnings $ Paid-in capital Retained earnings Total stockholder's equity $ Shares outstanding Original Balance Spears Company After Dividend $ $ After Split Spears Company has had 4 years of record earnings. Due to this success, the market price of its 400,000 shares of $2 par value common stock has increased from $6 per share to $50. During this period, paid-in capital remained the same at $2,400,000. Retained earnings increased from $1,800,000 to $12,000,000. CEO Don Ames is considering either (1) a 15% stock dividend or (2) a 2-for-1 stock split. He asks you to show the before-and-after effects of each option on (a) retained earnings, (b) total stockholders' equity, and (c) par value per share. (a) 1. 2. (b) Stock dividend-retained earnings 2-for-1 stock split - retained earnings $ Paid-in capital Retained earnings Total stockholder's equity $ Shares outstanding Original Balance Spears Company After Dividend $ $ After Split

Answer rating: 100% (QA)

Initial Financials Number of shares 400000 Par value per share 2 Market price per share 50 Paidin ca... View the full answer