Cullumber Company has had 4 years of record earnings. Due to this success, the market price of its 500,000 shares of $2 par valuecommon stock has increased from $14 per share to $53. During this period, paid-in capital remained the same at $3,000,000. Retainedearnings increased from $4,500,000 to $30,000,000. CEO Don Ames is considering either (1) a 15% stock dividend or (2) a 2-for-1stock split. He asks you to show the before-and-after effects of each option on (a) retained earnings, (b) total stockholders' equity, and(c) par value per share.(a)1.2.(b)Paid-in capitalStock dividend - retained earningsRetained earnings2-for-1 stock split - retained earnings(c)Total stockholders' equity $Shares outstanding1.2.$Stock dividend - par value per share$Original Balances2-for-1 stock split - par value per share$$$$After Dividend$$After Split

Stock Dividend:Stock Dividend is the issuance of shares by the company in the form of dividend to…

Answered: Cullumber Company has had 4 years of…

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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