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Assume that when you were in high school you saved $1,000 to invest for your college education. You purchased 200 shares of Smiley Incorporated, a small but growing company. Over the three years that you have owned the stock, the corporation's board of directors has taken the following actions. 1. Declared a 2-for-1 stock split. 2. Declared a 20 percent stock dividend. 3. Declared a 3-for-1 stock split. The current price of the stock is $12 per share. a. Calculate the current number of shares and the market value of your investment. b. Explain the likely reason the board of directors of the company has not declared a cash dividend. c. State your opinion as to whether or not you would have been better off if the board of directors had declared a cash dividend instead of the stock dividend and stock splits.

Assume that when you were in high school you saved $1,000 to invest for your college education. You purchased 200 shares of Smiley Incorporated, a small but growing company. Over the three years that you have owned the stock, the corporation's board of directors has taken the following actions. 1. Declared a 2-for-1 stock split. 2. Declared a 20 percent stock dividend. 3. Declared a 3-for-1 stock split. The current price of the stock is $12 per share. a. Calculate the current number of shares and the market value of your investment. b. Explain the likely reason the board of directors of the company has not declared a cash dividend. c. State your opinion as to whether or not you would have been better off if the board of directors had declared a cash dividend instead of the stock dividend and stock splits.

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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EXERCISE 12.2 Stock Dividends and Stock SplitsLO12-4 Assume that when you were in high school you saved $1,000 to invest for your college education. You purchased 200 shares of Smiley Incorporated, a small but growing company. Over the three years that you have owned the stock, the corporation's board of directors has taken the following actions. 1. Declared a 2-for-1 stock split. 2. Declared a 20 percent stock dividend. 3. Declared a 3-for-1 stock split. The current price of the stock is $12 per share. a. Calculate the current number of shares and the market value of your investment. b. Explain the likely reason the board of directors of the company has not declared a cash dividend. c. State your opinion as to whether or not you would have been better off if the board of directors had declared a cash dividend instead of the stock dividend and stock splits.
Transcribed Image Text:EXERCISE 12.2 Stock Dividends and Stock SplitsLO12-4 Assume that when you were in high school you saved $1,000 to invest for your college education. You purchased 200 shares of Smiley Incorporated, a small but growing company. Over the three years that you have owned the stock, the corporation's board of directors has taken the following actions. 1. Declared a 2-for-1 stock split. 2. Declared a 20 percent stock dividend. 3. Declared a 3-for-1 stock split. The current price of the stock is $12 per share. a. Calculate the current number of shares and the market value of your investment. b. Explain the likely reason the board of directors of the company has not declared a cash dividend. c. State your opinion as to whether or not you would have been better off if the board of directors had declared a cash dividend instead of the stock dividend and stock splits.
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