Squash Delight Inc. has the following balance sheet:
|
Assets
|
|
Cash
|
45,000
|
|
Accounts receivable
|
295,000
|
|
Fixed assets
|
772,000
|
|
Total assets
|
1,112,000
|
|
Liabilities
|
|
Accounts payable
|
296,000
|
|
Notes payable
|
54,000
|
|
Common stock (100,000 shares @ $2 par)
|
200,000
|
|
Capital in excess of par
|
100,000
|
|
Retained earnings
|
462,000
|
|
Total liabilities & owners' equity
|
1,112,000
|
The firm's stock sells for $14 a share.
a. Show the effect on the capital accounts of a two-for-one stock split.
b. Show the effect on the capital accounts of a 10 percent stock dividend. Part b is separate from part a. In part b do not assume the stock split has taken place.
c. Based on the balance in retained earnings, which of the two dividend plans is more restrictive on future cash dividends?