Stock Dividends and Share Splits
Mariposa Brewery Corp. has 220,000 shares outstanding with a market price of $12 per share. On the balance sheet, equity consists of common stock of $760,000 plus retained earnings of $275,000. Assume there are no taxes or transactions costs.
a. What is total owners' equity on the accounting balance sheet for Mariposa Brewery Corp.?
b. What happens to the total owners' equity on the balance sheet if the board of Mariposa Brewery Corp. declares a 10% stock dividend?
c. If you own 1000 shares now, how many will you own after Mariposa Brewery Corp. declares a 3-for-1 stock split?
d. What is the market price of a share of the company's stock after Mariposa Brewery Corp. declares a 3-for-1 split?
Please show your work as best as possible.