On October 31, the stockholders' equity section of Manolo Company's balance sheet consists of common stock $648,000 and retained earnings $400,000. Manolo is considering the following two courses of action: (1) declaring a 5% stock dividend on the 81,000 $8 par value shares outstanding or (2) effecting a 2-for-1 stock split that will reduce par value to $4 per share. The current market price is $17 per share. Instructions Prepare a tabular summary of the effects of the alternative actions on the company's stockholders' equity and outstanding shares. Use these column headings: Before Action, After Stock Dividend, and After Stock Split.

On October 31, the stockholders' equity section of Manolo Company's balance sheet consists of common stock $648,000 and retained earnings $400,000. Manolo is considering the following two courses of action: (1) declaring a 5% stock dividend on the 81,000 $8 par value shares outstanding or (2) effecting a 2-for-1 stock split that will reduce par value to $4 per share. The current market price is $17 per share. Instructions Prepare a tabular summary of the effects of the alternative actions on the company's stockholders' equity and outstanding shares. Use these column headings: Before Action, After Stock Dividend, and After Stock Split.

Financial Reporting, Financial Statement Analysis and Valuation

8th Edition

ISBN:9781285190907

Author:James M. Wahlen, Stephen P. Baginski, Mark Bradshaw

Publisher:James M. Wahlen, Stephen P. Baginski, Mark Bradshaw

Chapter7: Financial Activities

Section: Chapter Questions

Problem 3QE: Following is the shareholders equity section of All-Wood Doors on a day a. Use the financial...

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Following is the shareholders equity section of All-Wood Doors on a day a. Use the financial statement template below to show the financial statement effects of the following dividend events. (Assume that the events are independent.) (1) Cash dividend declaration and payment of 1 per share (3) Property dividend declaration and payment of shares representing a short-term investment in Screen Products, Ltd., with a fair value of 10,000 (3) 10% stock dividend (4) 100% stock dividend (5) 3-for-1 stock split (6) 1-for-2 reverse stock split b. Which events changed the book value of common equity? Under what conditions will these events lead to future increases and decreases in ROE?
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