90.2K

Verified Solution

Link Copied!

Stock split versus stock dividend Firm Mammoth Corporation is considering a 3-for-2 stock split. It currently has the stockholders' equity position shown. The current stock price is $120 per share. The most recent period's earnings available for common stock is included in retained earnings. Preferred stock Common stock (130,000 shares at $2 par) Paid-in capital in excess of par Retained earnings Total stockholders' equity $ 1,000,000 260,000 1,700,000 10,000,000 $12,960,000 a. If the firm declares a 3-for-2 stock split, the new balance in the common stock account after the split is $ . (Round to the nearest dollar.) The new balance in the paid-in capital in excess of par account after the stock split is $ . (Round to the nearest dollar.) The new balance in the retained earnings account after the stock split is $ . (Round to the nearest dollar.) The balance in the total stockholder's equity account after the split is $ . (Round to the nearest dollar.) b. The market price per share after the 3-for-2 stock split is $ . (Round to the nearest dollar.) c. The maximum cash dividend per share the firm could pay before the split is $ per share. (Round to the nearest cent.) The maximum cash dividend the firm could pay after the split is $ per share. (Round to the nearest cent.) d. Contrast your answers to parts a through c with the circumstances surrounding a 50% stock dividend. If the firm declares a 50% stock dividend, the balance in the common stock account after the dividend is $ . (Round to the nearest dollar.) The balance in the paid-in capital account after the dividend is $ . (Round to the nearest dollar.) The balance in the retained earnings account after the dividend is $ . (Round to the nearest dollar.) The balance in the total stockholder's equity account after the stock dividend is $ . (Round to the nearest dollar.) The new market price per share after the dividend is $ . (Round to the nearest dollar.) The maximum cash dividend the firm could pay before the stock dividend is $ per share. (Round to the nearest cent.) The maximum cash dividend the firm could pay after the stock dividend is $ per share. (Round to the nearest cent.) e. Which of the following statements about stock splits is false? (Select the best answer below.) O A. Stock splits reduce the par value per share of common stock. O B. Stock splits increase the number of shares outstanding. O C. Stock splits reduce the per share market value of outstanding shares. OD. Stock splits result in a change in the common stock account balance. Which of the following statements about stock dividends is false? (Select the best answer below.) O A. Stock dividends result in an increase to common stock and paid-in capital account and a corresponding decrease to retained earnings. O B. Stock dividends reduce the per share market value of outstanding shares. O C. Stock dividends increase the number of shares outstanding. OD. Stock dividends reduce the par value per share of common stock. Stock split versus stock dividend Firm Mammoth Corporation is considering a 3-for-2 stock split. It currently has the stockholders' equity position shown. The current stock price is $120 per share. The most recent period's earnings available for common stock is included in retained earnings. Preferred stock Common stock (130,000 shares at $2 par) Paid-in capital in excess of par Retained earnings Total stockholders' equity $ 1,000,000 260,000 1,700,000 10,000,000 $12,960,000 a. If the firm declares a 3-for-2 stock split, the new balance in the common stock account after the split is $ . (Round to the nearest dollar.) The new balance in the paid-in capital in excess of par account after the stock split is $ . (Round to the nearest dollar.) The new balance in the retained earnings account after the stock split is $ . (Round to the nearest dollar.) The balance in the total stockholder's equity account after the split is $ . (Round to the nearest dollar.) b. The market price per share after the 3-for-2 stock split is $ . (Round to the nearest dollar.) c. The maximum cash dividend per share the firm could pay before the split is $ per share. (Round to the nearest cent.) The maximum cash dividend the firm could pay after the split is $ per share. (Round to the nearest cent.) d. Contrast your answers to parts a through c with the circumstances surrounding a 50% stock dividend. If the firm declares a 50% stock dividend, the balance in the common stock account after the dividend is $ . (Round to the nearest dollar.) The balance in the paid-in capital account after the dividend is $ . (Round to the nearest dollar.) The balance in the retained earnings account after the dividend is $ . (Round to the nearest dollar.) The balance in the total stockholder's equity account after the stock dividend is $ . (Round to the nearest dollar.) The new market price per share after the dividend is $ . (Round to the nearest dollar.) The maximum cash dividend the firm could pay before the stock dividend is $ per share. (Round to the nearest cent.) The maximum cash dividend the firm could pay after the stock dividend is $ per share. (Round to the nearest cent.) e. Which of the following statements about stock splits is false? (Select the best answer below.) O A. Stock splits reduce the par value per share of common stock. O B. Stock splits increase the number of shares outstanding. O C. Stock splits reduce the per share market value of outstanding shares. OD. Stock splits result in a change in the common stock account balance. Which of the following statements about stock dividends is false? (Select the best answer below.) O A. Stock dividends result in an increase to common stock and paid-in capital account and a corresponding decrease to retained earnings. O B. Stock dividends reduce the per share market value of outstanding shares. O C. Stock dividends increase the number of shares outstanding. OD. Stock dividends reduce the par value per share of common stock

Answer & Explanation Solved by verified expert

See Answer