Question

Sunland Company has had 4 years of record earnings. Due to this success, the market price of its 460,000 shares of $ 4 par value common stock has increased from $12 per share to $ 52.During this period, paid-in capital remained the same at $ 5,520,000. Retained earnings increased from $ 4,140,000 to $ 27,600,000. CEO Don Ames is considering either (1) a 15% stock dividend or (2) a 2-for-1 stock split. He asks you to show the before- and-after effects of each option on (a) retained earnings, (b) total stockholders' equity, and (c) par value per share. retained earningS 2. 2-for-1 stock split-retained earnings $

Answer 1

Part A
Stock Dividend =	$ 2,76,00,000.00
	$     35,88,000.00	460000*52*15%
	$ 2,40,12,000.00
Stock Split	No change = $ 2,76,00,000
Part B
	Original	After Div	After Split
Paid in Capital	$     55,20,000.00	$     91,08,000.00	$     55,20,000.00
Retained Earnings	$ 2,76,00,000.00	$ 2,40,12,000.00	$ 2,76,00,000.00
Total St. Equity	$ 3,31,20,000.00	$ 3,31,20,000.00	$ 3,31,20,000.00
Shares O/S	460000	529000	920000
Part C
Stock Dividend =	No change
Stock Split =	2/2 = 1