Corporate Finance Assignment/ Professional Essay Writers
Stock Dividends versus Stock Splits Campbell Company wants to increase the number of shares of its common stock outstanding and is considering a stock dividend versus a stock split. The Stockholdersâ€™ Equity section of the firmâ€™s most recent balance sheet appeared as follows:
Common stock, $10 par, 50,000 shares issued and outstanding â€¦â€¦â€¦. $ 500,000
Additional paid-in capital â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦ 750,000
Retained earnings â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦ 880,000
Total stockholdersâ€™ equity â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦ $2,130,000
If a stock dividend is chosen, the firm wants to declare a 100% stock dividend. Because the stock dividend qualifies as a ? large stock dividend,?? it must be recorded at par value. If a stock split is chosen, Campbell will declare a 2-for-1 split.
1. Compare the effects of the stock dividends and stock splits on the accounting equation.
2. Develop the Stockholdersâ€™ Equity category of Campbellâ€™s balance sheet.
(a) After the stock dividend and
(b) After the stock split. Get FInance Help Today