On October 31, the stockholders' equity section of Wildhorse Company consists of common stock $300,000 and retained earnings $890,000. Wildhorse is considering the following two courses of action: (1) declaring a 4% stock dividend on the 30,000, $10 par value shares outstanding, or (2) effecting a 2-for-1 stock split that will reduce par value to $5 per share. The current market price is $16 per share. Prepare a tabular summary of the effects of the alternative actions on the components of stockholders' equity, outstanding shares, and par value per share. Before Action After Stock Dividend After Stock Split
On October 31, the stockholders' equity section of Wildhorse Company consists of common stock $300,000 and retained earnings $890,000. Wildhorse is considering the following two courses of action: (1) declaring a 4% stock dividend on the 30,000, $10 par value shares outstanding, or (2) effecting a 2-for-1 stock split that will reduce par value to $5 per share. The current market price is $16 per share. Prepare a tabular summary of the effects of the alternative actions on the components of stockholders' equity, outstanding shares, and par value per share. Before Action After Stock Dividend After Stock Split
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:On October 31, the stockholders' equity section of Wildhorse Company consists of common stock
$300,000 and retained earnings $890,000. Wildhorse is considering the following two courses of action: (1)
declaring a 4% stock dividend on the 30,000, $10 par value shares outstanding, or (2) effecting a 2-for-1 stock
split that will reduce par value to $5 per share. The current market price is $16 per share.
Prepare a tabular summary of the effects of the alternative actions on the components of stockholders'
equity, outstanding shares, and par value per share.
Stockholders'
equity
Paid-in
capital
Common
stock
In excess
of par
Total
paid-in
capital
Retained
earnings
Total
stockholders'
equity
Outstanding
shares
Par value per
share
$
Before
Action
After
Stock
Dividend
S
7011
11
S
After
Stock
Split
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