Pharoah Company has had 4 years of record earnings. Due to this success, the market price of its 500,000 shares of $2 par value common stock has increased from $15 per share to $55. During this period, paid-in capital remained the same at $3,000,000. Retained earnings 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-1 stock 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) Stock dividend retained earnings 2-for-1 stock split-retained earnings Paid-in capital Retained earnings Total stockholders' equity Shares outstanding Original Balances 3000000 30000000 36000000 500000 25875000 30000000 $ After Dividend 10125000 25875000 36000000 575000 After Split 3000000 30000000 36000000 100000

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