The DeWitt Company’s shareholders’ equity account (book value) as of December 31, 20X1, is as follows:
|
Common stock ($5 par value; 1,000,000 shares) |
$ 5,000,000 |
|
Additional paid in capital |
5,000,000 |
|
Retained earnings |
15,000,000 |
|
Total shareholders’ equity |
$25,000,000 |
Currently, DeWitt is under pressure from shareholders to pay some dividends. DeWitt’s cash balance is $500,000, all of which is needed for transactions purposes. The stock is trading for $7 a share.
a. Reformulate the shareholders’ equity account if the company pays a 15 percent stock dividend.
b. Reformulate the shareholders’ equity account if the company pays a 25 percent stock dividend.
c. Reformulate the shareholders’ equity account if the company declares a 5 for 4 stock split.