On October 31, the stockholders' equity section of Heins Company consists of common stock $325,000 and retained earnings $895,000. Heins is considering the following two courses of action: (1) declaring a 6% stock dividend on the 32,500, $10 par value shares outstanding, or (2) effecting a 2-for-1 stock split that will reduce par value to $5 per share. The current market price is $14 per share.
Prepare a tabular summary of the effects of the alternative actions on the components of stockholders' equity, outstanding shares, and par value per share.
Before
Action |
After
Stock
Dividend |
After
Stock
Split |
| Stockholders' equity |
| Paid-in capital |
| Common stock |
$ 325000 |
$ |
$ |
| In excess of par |
|
|
|
| Total paid-in capital |
|
|
|
| Retained earnings |
895000 |
|
|
| Total stockholders' equity |
$ 927500 |
$ |
$ |
| Outstanding shares |
|
|
|
| Par value per share |
$ |
$ |
$ |