Question

Exercise 11-5 Stock dividends and splits LO P2 On June 30, 2017, Sharper Corporation's common stock is priced at $29.50 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, 60,000 shares authorized 24,000 shares issued and outstanding Paid-in capital in excess of par value, common stock Retained earnings Total stockholders' equity $ 144,000 100,000 244,000 $ 488.000 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 a.,b.& c. Complete the below table to calculate the retained earnings balance, total stockholders' equity and number of outstanding shares. 2. Assume that the company implements a 2-for-1 stock split instead of the stock dividend in part 1. Answer these questions about stockholders' equity as it exists after issuing the new shares a.,b.& c. Complete the below table to calculate the retained earnings balance, total stockholders' equity and number of outstanding shares.

Answer 1

1) Stock dividend

Stock dividend	Before stock dividend	Impact of stock dividend	After stock dividend
Common Stock	144000	144000	288000
Paid in capital in excess of par value	100000	0	100000
Total Contributed capital	244000	144000	388000
Retained earnings	244000	-144000	100000
Total Stockholder's equity	488000	0	488000
Number of common shares outstanding	24000	24000	48000

2) Stock split

Stock split	Before stock split	Impact of stock split	After stock split
Common Stock	144000	0	144000
Paid in capital in excess of par value	100000	0	100000
Total Contributed capital	244000	0	244000
Retained earnings	244000	0	244000
Total Stockholder's equity	488000	0	488000
Number of common shares outstanding	24000	24000	48000