Intermediate Accounting: Reporting And Analysis
3rd Edition
ISBN:9781337788281
Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Chapter16: Retained Earnings And Earnings Per Share
Section: Chapter Questions
Problem 5E: Stock Dividend Comparison Although Oriole Company has enough retained earnings legally to declare a...
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Stock split versus stock dividend-Firm Mammoth Corporation is considering a 3-for-2 stock split. It currently has the stockholders' equity position shown. The
current stock price is $120 per share. The most recent period's earnings available for common stock is included in retained earnings.
Options
$ 1,000,000
720,000
1,700,000
10,000,000
Preferred stock
Common stock (120,000 shares at $6 par)
Paid-in capital in excess of par
Retained earnings
Total stockholders' equity
$13,420,000
a. What effect on Mammoth's equity account would result from the stock split?
b. What change in stock price would you expect to result from the stock split?
a. If the firm declares a 3-for-2 stock split, the new balance in the common stock account after the split is S
(Round to the nearest dollar.)
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