Question

On June 30, Sharper Corporation’s common stock is priced at $27.00 per share before any stock dividend or split, and the stockholders’ equity section of its balance sheet appears as follows.

Common stock—$8 par value, 85,000 shares authorized, 34,000 shares issued and outstanding	$	272,000
Paid-in capital in excess of par value, common stock		100,000
Retained earnings		372,000
Total stockholders’ equity	$	744,000

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.
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 3-for-2 stock split instead of the stock dividend in part 1.
a., b. & c. 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

	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 0 Retained earnings Total stockholders' equity $0 $0 $0 Number of common shares outstanding

	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 0 Retained earnings Total stockholders' equity $0 $0 $0 Number of common shares outstanding

• 	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 0 Retained earnings Total stockholders' equity $0 $0 $0 Number of common shares outstanding

Answer 1

1
Stock Dividend	Before Stock Dividend	Impact of Stock Dividend	After Stock Dividend
Common stock	272,000	272,000	544,000
Paid in capital in excess of par value	100,000	0	100,000
Total contributed capital	372,000	272,000	644,000
Retained Earnings	372,000	-272,000	100,000
Total Stockholders' Equity	744,000	0	744,000
Number of common shares outstanding	34,000	34,000	68,000
2
Stock Split	Before Stock Split	Impact of Stock Split	After Stock Split
Common stock	272,000	0	272,000
Paid in capital in excess of par value	100,000	0	100,000
Total contributed capital	372,000	0	372,000
Retained Earnings	372,000	0	372,000
Total Stockholders' Equity	744,000	0	744,000
Number of common shares outstanding	34,000	17,000	51,000