Show the effect on the capital account of a 10 percent


Question: Austin Power Company has the following balance sheet:

1084_Austin.png

The firm has a market price of $11 a share.

a. Show the effect on the capital account(s) of a two-for-one stock split.

b. Show the effect on the capital account of a 10 percent stock dividend. Part b is separate from part a. In part b do not assume the stock split has taken place.

c. Based on the balance in retained earnings, which of the two dividend plans is more restrictive on future cash dividends?

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Finance Basics: Show the effect on the capital account of a 10 percent
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