Question

On June 30, 2017, Sharper Corporation’s common stock is priced at $26.00 per share before any stock dividend or split, and the stockholders’ equity section of its balance sheet appears as follows.

Common stock—$6 par value, 70,000 shares authorized, 28,000 shares issued and outstanding	$	168,000
Paid-in capital in excess of par value, common stock		100,000
Retained earnings		268,000
Total stockholders’ equity	$	536,000

1. Assume that the company declares and immediately distributes a 100% stock dividend. This event is recorded by capitalizing retained earnings equal to the stock’s par value. Answer these questions about stockholders’ equity as it exists after issuing the new shares.

Assume that the company declares and immediately distributes a 100% stock dividend. This event is recorded by capitalizing retained earnings equal to the stock’s par value. Answer these questions about stockholders’ equity as it exists after issuing the new shares. Complete the below table to calculate the retained earnings balance, total stockholders’ equity and number of outstanding shares.

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Assume that the company declares and immediately distributes a 100% stock dividend. This event is recorded by capitalizing retained earnings equal to the stock’s par value. Answer these questions about stockholders’ equity as it exists after issuing the new shares. Complete the below table to calculate the retained earnings balance, total stockholders’ equity and number of outstanding shares.

	Stock Dividend Before Stock Dividend Impact of Stock Dividend After Stock Dividend Common stock Paid in capital in excess of par value Total contributed capital 0 0 0 Retained earnings Total stockholders' equity $0 0 $0 Number of common shares outstanding

Assume that the company implements a 2-for-1 stock split instead of the stock dividend in required 1. Answer these questions about stockholders’ equity as it exists after issuing the new shares. Complete the below table to calculate the retained earnings balance, total stockholders’ equity and number of outstanding shares.

	Stock Split Before Stock Split Impact of Stock Split After Stock Split Common stock Paid in capital in excess of par value Total contributed capital 0 0 Retained earnings Total stockholders' equity $0 $0 Number of common shares outstanding

Answer 1

Assume that the company declares and immediately distributes a 100% stock dividend. This event is recorded by capitalizing retained earnings equal to the stock’s par value. Answer these questions about stockholders’ equity as it exists after issuing the new shares. Complete the below table to calculate the retained earnings balance, total stockholders’ equity and number of outstanding shares.

	Stock Dividend Before Stock Dividend Impact of Stock Dividend After Stock Dividend Common stock 168000 168000 336000 Paid in capital in excess of par value 100000 0 100000 Total contributed capital 268000 168000 436000 Retained earnings 268000 -168000 100000 Total stockholders' equity 536000 0 536000 Number of common shares outstanding 28000 28000 56000

Assume that the company implements a 2-for-1 stock split instead of the stock dividend in required 1. Answer these questions about stockholders’ equity as it exists after issuing the new shares. Complete the below table to calculate the retained earnings balance, total stockholders’ equity and number of outstanding shares.

	Stock Split Before Stock Split Impact of Stock Split After Stock Split Common stock 168000 0 168000 Paid in capital in excess of par value 100000 0 100000 Total Contributed capita 268000 0 268000 Retained earnings 268000 0 268000 Total Stockholder's equity 536000 0 536000 Number of common shares outstanding 28000 28000 56000