Question: The share price of Morris Sports Ltd., a small but growing sporting goods company, has escalated rapidly. The price has recently risen to $20 and management thinks this is too high for such a small company. Assume that Morris could meet this problem through either a 2-for-l stock split or by declaring a 1 00-percent stock dividend. The present equity section of Morris balance sheet appears as follows:
Shareholders' Equity $100,000
10,000 common shares without par value 265,000
Retained earnings $365,000
Show what the effects of the 2-for-l stock split and of the stock dividend would be on the firm's balance sheet.