Riff CD Company has had 4 years of record earnings.
Due to this success, the market price of its 400,000 shares of $3 par value common stock has increased from $12 per share to $51.
During this period, paid in capital remained the same at $2,400,000. Retained earnings increased from $1,800,000 to $12,000,000.
CEO Josh Borke 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 and (b) total stockholders’ equity.
PAID IN CAPITAL: Original Balance: ______ After dividend: _____ After Split: _____
RETAINED EARNINGS: Original Balance: _____ After dividend: _____ After Split: _____
TOTAL STOCKHOLDERS EQUITY: Originical Balance: _____ After dividend: _____ After Split: _____
SHARES OUTSTANDING: Original Balance: _____ After dividend: _____ After Split: ______