Question

Exercise 11-15 (Video) On October 31, the stockholders' equity section of Cheyenne Corp. consists of common stock $335,000 and retained earnings $897,000. Cheyenne is considering the following two courses of action: (1) declaring a 6% stock dividend on the 33,500, $10 par value shares outstanding, or (2) effecting a 2-for-1 stock split that will reduce par value to $5 per share. The current market price is $16 per share. Prepare a tabular summary of the effects of the alternative actions on the components of stockholders' equity, outstanding shares, and par value per share. Before Action After Stock Dividend After Stock Split Stockholders' equity Pald-in capital Common stock In excess of par Total paid-in capital Retained earnings Total stockholders' equity Outstanding shares Par value per share

Answer 1

Table

	Before action	After stock dividend	After stock split
Stockholder's equity
Paid in Capital
Common Stock	335000	355100	335000
In excess of par		12060
Total paid in capital	335000	367160	335000
Retained earnings	897000	864840	897000
Total Stockholder's equity	1232000	1232000	1232000
Outstanding shares	33500	33500*1.06 = 35510	33500*2 = 67000
Par value per share	10	10	5