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Question: In Problem 8, suppose the company instead


In Problem 8, suppose the company instead decides on a 4-for-1 stock split. The firm’s 75-cent per-share cash dividend on the new (postsplit) shares represents an increase of 10 percent over last year’s dividend on the presplit stock. What effect does this have on the equity accounts? What was last year’s dividend per share?

Problem 8:
The company with the common equity accounts shown here has declared a 15 percent stock dividend when the market value of its stock is $64 per share. What effects will the distribution of the stock dividend have on the equity accounts?

Common stock ($1 par value) ……………………………….. $ 225,000
Capital surplus ……………………………………………………….. 535,000
Retained earnings ………………………………………………… 2,968,500
Total owners’ equity …………………………………………… $3,728,500


2.99

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