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Question: Spears Company has had 4 years of record earnings. Due to this success, the market price of its 400,000 shares of $2 par value common stock has increased from $6 per share to $50. During this period, paid-in capital remained the same at $2,400,000. Retained earnings increased from $1,800,000 to $12,000,000. CEO Don Ames is considering either

(1) a 15% stock dividend or

(2) a 2-for-1 stock split.

He asks you to show the before-and-after effects of each option on

(a) retained earnings,

(b) total stockholders' equity, and

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Accounting Basics, Accounting

Category:- Accounting Basics
Reference No.:- M92659553

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