Question: 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.