Do It! Review 11-3b Oriole Company has had 4 years of record earnings. Due to this...

Do It! Review 11-3b Oriole Company has had 4 years of record earnings. Due to this success, the market price of its 435,000 shares of $4 par value common stock has increased from $15 per share to $52. During this period, paid-in capital remained the same at $5,220,000. Retained earnings increased from $3,915,000 to $26,100,000. 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. Stock dividend - retained earnings $ 2. 2-for-1 stock split - retained earnings $ (b) Oriole Company Original Balance After Dividend After Split Paid-in capital $ $ $ Retained earnings Total stockholder’s equity $ $ $ Shares outstanding (c) 1. Stock dividend - par value per share $ 2. 2-for-1 stock split - par value per share $ Click if you would like to Show Work for this question: Open Show Work

Expert Solution

a)
(1) Stock dividend - Retained earnings:
Stock Dividend = 435,000 x 15% x $52	$3,393,000.00
Retained Earnings Reduced by = $26,100,000 - $3,393,000	$22,707,000.00
(2) a 2-for-1 stock split
The retained earnings after the share split would be the same as itwas before the split.
Retained Earnings =	$26,100,000.00

b)
	Original Balances	After Dividend	After Split
Share capital and share premium	$5,220,000.00	$8,613,000.00	$5,220,000.00
Retained Earnings	$26,100,000.00	$22,707,000.00	$26,100,000.00
Total equity	$31,320,000.00	$31,320,000.00	$31,320,000.00
Shares outstanding	435,000.00	500,250.00	870,000.00

Share Capital & Share Premium after Dividend = $5220000+3393000	8,613,000.00
Shares outstanding
After Dividend = 435000 x 1.15	500,250.00
After Split = 435000 x 2	870,000.00

c)	Original Balances	After Dividend	After Split
Par value per share	$4.00	$4.00	$2.00

ekkarill92 answered 1 year ago

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