A8. (Accounting for Stock Dividends and Stock Splits)
Corporate Financial Management (3rd Edition)
Emery, Douglas R., Finnerty, John D., & Stowe, John D. (2007)
Individual assignment: Text Problem Set IV:
Chapter 18, Problems
A8. (Accounting for Stock Dividends and Stock Splits) Shore Electronics Corporation's common stock is selling for $44 per share, and its common stockholders' equity is shown here.
a. Show the impact of a 50% stock dividend. (Hint: This is a large stock dividend, not a small one.)
b. Show the impact of a 3-for-2 stock split.
c. Describe how the stock market would react to each event. How would you explain the difference in reaction?
Paid-in capital ($4 par value; 5,000,000 shares) $ 20,000,000
Capital contributed in excess of par value 30,000,000
Retained earnings 50,000,000
Common stockholders' equity $100,000,000
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