Problem:
On October 31, the stockholders' equity section of Pele Company's balance sheet consists of common stock $721,600 and retained earnings $431,800.
Pele is considering the following two courses of action:
(1) Declaring a 6% stock dividend on the 90,200 $8 par value shares outstanding
(2) Effecting a 2-for-1 stock split that will reduce par value to $4 per share.
The current market price is $16 per share.
Required:
Question: Prepare a tabular summary of the effects of the alternative actions on the company's stockholders' equity and outstanding shares.
Note: Please provide step by step solution.