Cullumber AG has had 4 years of net income. Due to this success, the market price of its 500,000 shares of £2 par value ordinary shares has increased from £13 per share to £47. During this period, total share capital and share premium remained the same at £2,490,000. Retained earnings increased from £1,640,000 to £12,800,000. CEO E. Gary is considering either a 15% share dividend or a 2-for-1 share split. He asks you to show the before-and after effects of each option on retained earnings and total equity. Original Balances Retained earnings Total equity £ £ £ After Dividend £ £ After Split
Cullumber AG has had 4 years of net income. Due to this success, the market price of its 500,000 shares of £2 par value ordinary shares has increased from £13 per share to £47. During this period, total share capital and share premium remained the same at £2,490,000. Retained earnings increased from £1,640,000 to £12,800,000. CEO E. Gary is considering either a 15% share dividend or a 2-for-1 share split. He asks you to show the before-and after effects of each option on retained earnings and total equity. Original Balances Retained earnings Total equity £ £ £ After Dividend £ £ After Split
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Cullumber AG has had 4 years of net income. Due to this success, the market price of its 500,000 shares of £2 par value ordinary
shares has increased from £13 per share to £47. During this period, total share capital and share premium remained the same at
£2,490,000. Retained earnings increased from £1,640,000 to £12,800,000, CEO E. Gary is considering either a 15% share dividend or
a 2-for-1 share split. He asks you to show the before-and after effects of each option on retained earnings and total equity.
Original Balances
After Dividendi
Retained earnings
Total equity
£
£
E
4
£
£
After Split
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