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A14-18 Stock Dividend and Stock Split (LO 14-6, 14-7) At the end of 20X6, Home Ltd. reported the following in shareholders' equity: Common shares, no-par value; authorized, unlimited shares; issued, 14,470,000 shares Retained earnings At this time, the shares were trading in the range of $3 to $5 per share on public stock markets. The company's board of directors is contemplating two alternative courses of action: 1. Declaring a 50% stock dividend, or 2. Executing a 3-for-2 stock split. Required: 1. Prepare the shareholders' equity section for each alternative, assuming that market value is used to capitalize the stock dividend. Common shares, no-par value; authorized, unlimited shares; issued. Retained earnings Before (Not Required) $ Stock Dividend $18,891,000 52,920,000 $71,811,000 0 $ Stock Split 0 $ 0

A14-18 Stock Dividend and Stock Split (LO 14-6, 14-7) At the end of 20X6, Home Ltd. reported the following in shareholders' equity: Common shares, no-par value; authorized, unlimited shares; issued, 14,470,000 shares Retained earnings At this time, the shares were trading in the range of $3 to $5 per share on public stock markets. The company's board of directors is contemplating two alternative courses of action: 1. Declaring a 50% stock dividend, or 2. Executing a 3-for-2 stock split. Required: 1. Prepare the shareholders' equity section for each alternative, assuming that market value is used to capitalize the stock dividend. Common shares, no-par value; authorized, unlimited shares; issued. Retained earnings Before (Not Required) $ Stock Dividend $18,891,000 52,920,000 $71,811,000 0 $ Stock Split 0 $ 0

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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A14-18 Stock Dividend and Stock Split (LO 14-6, 14-7) At the end of 20X6, Home Ltd. reported the following in shareholders' equity: Common shares, no-par value; authorized, unlimited shares; issued, 14,470,000 shares Retained earnings At this time, the shares were trading in the range of $3 to $5 per share on public stock markets. The company's board of directors is contemplating two alternative courses of action: 1. Declaring a 50% stock dividend, or 2. Executing a 3-for-2 stock split. Required: 1. Prepare the shareholders' equity section for each alternative, assuming that market value is used to capitalize the stock dividend. Common shares, no-par value; authorized, unlimited shares; issued. Retained earnings Before (Not Required) $ Stock Dividend 0 $ $18,891,000 52,920,000 $71,811,000 0 Stock Split $ 0
Transcribed Image Text:A14-18 Stock Dividend and Stock Split (LO 14-6, 14-7) At the end of 20X6, Home Ltd. reported the following in shareholders' equity: Common shares, no-par value; authorized, unlimited shares; issued, 14,470,000 shares Retained earnings At this time, the shares were trading in the range of $3 to $5 per share on public stock markets. The company's board of directors is contemplating two alternative courses of action: 1. Declaring a 50% stock dividend, or 2. Executing a 3-for-2 stock split. Required: 1. Prepare the shareholders' equity section for each alternative, assuming that market value is used to capitalize the stock dividend. Common shares, no-par value; authorized, unlimited shares; issued. Retained earnings Before (Not Required) $ Stock Dividend 0 $ $18,891,000 52,920,000 $71,811,000 0 Stock Split $ 0
2. What would the expected share price be assuming a share price of $3 for alternative 1 and a share price of $5 for alternative 2? (Round your answers to 2 decimal places.) Case 1 Case 2 3-a. Which alternative would shareholders prefer? Declaring a 50% stock dividend Executing a 3-for-2 stock split OShareholders are indifferent in both situations 3-b. This part of the question is not part of your Connect assignment. 4. Which alternative would the company prefer? Declaring a 50% stock dividend, or Executing a 3-for-2 stock split Shareholders are indifferent in both situations
Transcribed Image Text:2. What would the expected share price be assuming a share price of $3 for alternative 1 and a share price of $5 for alternative 2? (Round your answers to 2 decimal places.) Case 1 Case 2 3-a. Which alternative would shareholders prefer? Declaring a 50% stock dividend Executing a 3-for-2 stock split OShareholders are indifferent in both situations 3-b. This part of the question is not part of your Connect assignment. 4. Which alternative would the company prefer? Declaring a 50% stock dividend, or Executing a 3-for-2 stock split Shareholders are indifferent in both situations
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