Reference no: EM132619905
Squash Delight Inc. has the following balance sheet:
Assets
Cash $55,000
Accounts receivable 275,000
Fixed assets 870,000
Total assets $1,200,000
Liabilities Accounts payable $250,000
Notes payable 58,000
Common stock (100,000 shares @ $2 par) 200,000
Capital in excess of par 100,000
Retained earnings 592,000
Total liabilities & owners' equity $1,200,000
The firm's stock sells for $12 a share.
Question a. Show the effect on the capital accounts of a two-for-one stock split. (Do not round intermediate calculations and round your answers to the nearest whole dollar.)
Question b. Show the effect on the capital accounts of a 10 percent stock dividend. Part b is separate from part a. In part b, do not assume the stock split has taken place. (Do not round intermediate calculations and round your answers to the nearest whole dollar.)
Question c. Based on the balance in retained earnings, which of the two dividend plans is more restrictive on future cash dividends?
Stock dividend
Stock split