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    Financial Accounting

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    On October 31, the stockholders' equity section of Hinckley Company consists of common
    stock $800,000 and retained earnings $400,000. Hinckley is considering the following two
    courses of action: (1) Declare a 10% stock dividend on the 80,000, $10 par value shares outstanding,
    or (2) effect a 2-for-1 stock split that will reduce par value to $5 per share. The current
    market price is $15 per share.
    Instructions
    Prepare a tabular summary of the effects of the alternative actions on the components of stockholders'
    equity, outstanding shares, and book value per share. Use the following column headings:
    Before Action, After Stock Dividend, and After Stock Split.

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    https://brainmass.com/business/business-math/financial-accounting-14399

    Solution Preview

    Hi there,
    <br>
    <br>Before action:
    <br>Common stock = 800,000
    <br>Retained Earnings = 400,000
    <br>
    <br>After Dividend =
    <br>Common stock = 800,000
    <br>Retained Earnings = 320,000
    <br>
    <br>After Stock Split:
    <br>Common stock = 800,000
    <br>Retained Earnings = 400,000
    <br>
    <br>If they chose to ...

    Solution Summary

    This problem involves the fundamentals of accounting

    $2.19

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