On October 31, the stockholders' equity section of Pele Company's balance sheet consists of common stock $648,000 and retained earnings $400,000.
Pele is considering the following two courses of action:
| (1) |
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Declaring a 5% stock dividend on the 81,000 $8 par value shares outstanding |
| (2) |
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Effecting a 2-for-1 stock split that will reduce par value to $4 per share. |
The current market price is $17 per share.
Prepare a tabular summary of the effects of the alternative actions on the company's stockholders' equity and outstanding shares.
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Pele Company's
Balance Sheet
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Before Action |
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After Stock Dividend |
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After Stock Split |
| Stockholders' equity |
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| Paid-in capital |
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$
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$
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$
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| Retained earnings |
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| Total stockholders' equity |
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$
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$
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$
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| Outstanding shares |
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